Compagnie Financière Richemont (VTX:CFR) Has Announced That It Will Be Increasing Its Dividend To CHF3.25

Compagnie Financière Richemont SA's (VTX:CFR) dividend will be increasing to CHF3.25 on 23rd of September. This will take the dividend yield from 2.0% to 2.9%, providing a nice boost to shareholder returns.

Check out our latest analysis for Compagnie Financière Richemont

Compagnie Financière Richemont's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Compagnie Financière Richemont's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 47.4%. If the dividend continues on this path, the payout ratio could be 61% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was €0.44 in 2012, and the most recent fiscal year payment was €2.15. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Compagnie Financière Richemont has impressed us by growing EPS at 11% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Compagnie Financière Richemont 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Compagnie Financière Richemont that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.