Orell Füssli's (VTX:OFN) Shareholders Will Receive A Bigger Dividend Than Last Year

Orell Füssli AG (VTX:OFN) will increase its dividend from last year's comparable payment on the 14th of May to CHF3.90. This makes the dividend yield 4.9%, which is above the industry average.

See our latest analysis for Orell Füssli

Orell Füssli's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Orell Füssli's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 8.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 59% by next year, which is in a pretty sustainable range.

Orell Füssli's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was CHF2.80 in 2016, and the most recent fiscal year payment was CHF3.90. This works out to be a compound annual growth rate (CAGR) of approximately 4.2% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Orell Füssli has impressed us by growing EPS at 56% per year over the past five years. Orell Füssli is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Orell Füssli Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Orell Füssli that investors should take into consideration. Is Orell Füssli not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.