Stock Analysis

Credit Suisse Group (VTX:CSGN) Is Due To Pay A Dividend Of CHF0.10

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Credit Suisse Group AG (VTX:CSGN) has announced that it will pay a dividend of CHF0.10 per share on the 5th of May. Including this payment, the dividend yield on the stock will be 1.3%, which is a modest boost for shareholders' returns.

View our latest analysis for Credit Suisse Group

Credit Suisse Group's Distributions May Be Difficult To Sustain

If it is predictable over a long period, even low dividend yields can be attractive. Credit Suisse Group is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS could expand by 39.9% if recent trends continue. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

SWX:CSGN Historic Dividend March 26th 2022

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was CHF1.30, compared to the most recent full-year payment of CHF0.10. The dividend has fallen 92% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. We are encouraged to see that Credit Suisse Group has grown earnings per share at 40% per year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Credit Suisse Group that you should be aware of before investing. 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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