There's A Lot To Like About Leonteq's (VTX:LEON) Upcoming CHF3.00 Dividend

Leonteq AG (VTX:LEON) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Leonteq's shares before the 4th of April to receive the dividend, which will be paid on the 6th of April.

The company's next dividend payment will be CHF3.00 per share, and in the last 12 months, the company paid a total of CHF3.00 per share. Based on the last year's worth of payments, Leonteq has a trailing yield of 3.9% on the current stock price of CHF76.6. If you buy this business for its dividend, you should have an idea of whether Leonteq's dividend is reliable and sustainable. As a result, readers should always check whether Leonteq has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Leonteq

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Leonteq paying out a modest 35% of its earnings.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Leonteq's earnings have been skyrocketing, up 51% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Leonteq has delivered an average of 22% per year annual increase in its dividend, based on the past nine years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy Leonteq for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Leonteq ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Leonteq for the dividends alone, you should always be mindful of the risks involved. We've identified 3 warning signs with Leonteq (at least 1 which is a bit unpleasant), and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.