Cembra Money Bank (VTX:CMBN) Has Announced That It Will Be Increasing Its Dividend To CHF4.25

Cembra Money Bank AG (VTX:CMBN) will increase its dividend from last year's comparable payment on the 30th of April to CHF4.25. This will take the annual payment to 4.5% 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 Forecasted To Be Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Cembra Money Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Cembra Money Bank's payout ratio of 73% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 31.9% over the next 3 years. Analysts estimate the future payout ratio will be 75% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Cembra Money Bank Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CHF2.85 in 2015 to the most recent total annual payment of CHF4.25. This means that it has been growing its distributions at 4.1% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately, Cembra Money Bank's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

Cembra Money Bank Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Cembra Money Bank 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 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. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Cembra Money Bank analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Cembra Money Bank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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