Metall Zug (VTX:METN) Will Pay A Dividend Of CHF20.00

The board of Metall Zug AG (VTX:METN) has announced that it will pay a dividend on the 15th of May, with investors receiving CHF20.00 per share. The dividend yield will be 2.0% based on this payment which is still above the industry average.

Our free stock report includes 1 warning sign investors should be aware of before investing in Metall Zug. Read for free now.

Metall Zug's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Metall Zug's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to fall by 68.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 48%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for Metall Zug

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. Since 2015, the dividend has gone from CHF61.00 total annually to CHF20.00. Dividend payments have fallen sharply, down 67% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's encouraging to see that Metall Zug has been growing its earnings per share at 12% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Metall Zug's prospects of growing its dividend payments in the future.

Our Thoughts On Metall Zug's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 1 warning sign for Metall Zug that you should be aware of before investing. Is Metall Zug not quite the opportunity you were looking for? Why not check out our selection of top 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.