Cembra Money Bank (VTX:CMBN) Has Announced That It Will Be Increasing Its Dividend To CHF3.85

The board of Cembra Money Bank AG (VTX:CMBN) has announced that the dividend on 29th of April will be increased to CHF3.85, which will be 2.7% higher than last year. This will take the annual payment from 5.6% to 5.7% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Cembra Money Bank

Cembra Money Bank's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Cembra Money Bank was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 2.5%. If the dividend continues on this path, the payout ratio could be 72% by next year, which we think can be pretty sustainable going forward.

Cembra Money Bank Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2014, the first annual payment was CHF2.85, compared to the most recent full-year payment of CHF3.75. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Cembra Money Bank May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Cembra Money Bank hasn't seen much change in its earnings per share over the last five years. Growth of 0.5% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Cembra Money Bank will make a great income stock. While Cembra Money Bank is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Cembra Money Bank (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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