Interested In DKSH Holding's (VTX:DKSH) Upcoming CHF1.95 Dividend? You Have Three Days Left

It looks like DKSH Holding AG (VTX:DKSH) is about to go ex-dividend in the next three days. Investors can purchase shares before the 22nd of March in order to be eligible for this dividend, which will be paid on the 24th of March.

DKSH Holding's upcoming dividend is CHF1.95 a share, following on from the last 12 months, when the company distributed a total of CHF1.95 per share to shareholders. Looking at the last 12 months of distributions, DKSH Holding has a trailing yield of approximately 2.7% on its current stock price of CHF72.9. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether DKSH Holding can afford its dividend, and if the dividend could grow.

View our latest analysis for DKSH Holding

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. It paid out 81% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that DKSH Holding's earnings are down 5.0% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. DKSH Holding has delivered an average of 13% per year annual increase in its dividend, based on the past nine years of dividend payments. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. DKSH Holding is already paying out 81% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.

To Sum It Up

Has DKSH Holding got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall, it's hard to get excited about DKSH Holding from a dividend perspective.

However if you're still interested in DKSH Holding as a potential investment, you should definitely consider some of the risks involved with DKSH Holding. Our analysis shows 1 warning sign for DKSH Holding and you should be aware of this before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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