Bâloise Holding (VTX:BALN) Is Increasing Its Dividend To CHF7.40

Bâloise Holding AG (VTX:BALN) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of May to CHF7.40. Based on this payment, the dividend yield for the company will be 5.2%, which is fairly typical for the industry.

Check out our latest analysis for Bâloise Holding

Bâloise Holding's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Bâloise Holding's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 25.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

Bâloise Holding Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CHF4.50 in 2013, and the most recent fiscal year payment was CHF7.40. This works out to be a compound annual growth rate (CAGR) of approximately 5.1% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Bâloise Holding May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Bâloise Holding hasn't seen much change in its earnings per share over the last five years. Growth of 1.0% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Bâloise Holding will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Bâloise Holding that investors should take into consideration. 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.