Groupe Minoteries (VTX:GMI) Has Announced A Dividend Of CHF11.00

The board of Groupe Minoteries SA (VTX:GMI) has announced that it will pay a dividend on the 26th of May, with investors receiving CHF11.00 per share. This makes the dividend yield 4.2%, which will augment investor returns quite nicely.

Check out our latest analysis for Groupe Minoteries

Groupe Minoteries' Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment was quite easily covered by earnings, but it made up 199% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Unless the company can turn things around, EPS could fall by 0.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 74%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was CHF5.00 in 2015, and the most recent fiscal year payment was CHF11.00. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Groupe Minoteries' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Groupe Minoteries' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Groupe Minoteries is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Groupe Minoteries that investors need to be conscious of moving forward. Is Groupe Minoteries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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