Metall Zug (VTX:METN) Will Pay A Larger Dividend Than Last Year At CHF30.00

Metall Zug AG's (VTX:METN) dividend will be increasing to CHF30.00 on 5th of May. This will take the annual payment from 1.4% to 1.4% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Metall Zug

Metall Zug's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. But before making this announcement, Metall Zug's earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 95% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

EPS is set to fall by 3.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 24%, 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

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the first annual payment was CHF55.00, compared to the most recent full-year payment of CHF30.00. This works out to be a decline of approximately 5.9% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though Metall Zug's EPS has declined at around 11% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Metall Zug is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Metall Zug stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.