Compagnie Financière Richemont (VTX:CFR) Has Announced That It Will Be Increasing Its Dividend To €3.50

Compagnie Financière Richemont SA's (VTX:CFR) dividend will be increasing from last year's payment of the same period to €3.50 on 22nd of September. This takes the annual payment to 1.4% of the current stock price, which is about average for the industry.

See our latest analysis for Compagnie Financière Richemont

Compagnie Financière Richemont's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by Compagnie Financière Richemont's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 4.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from €0.793 total annually to €2.15. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Compagnie Financière Richemont has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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. It's encouraging to see that Compagnie Financière Richemont has been growing its earnings per share at 26% a year over the past five years. Compagnie Financière Richemont is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Compagnie Financière Richemont Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Compagnie Financière Richemont is a strong income stock thanks to its track record and growing earnings. 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 of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 26 Compagnie Financière Richemont analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.