Bâloise Holding (VTX:BALN) Is Paying Out A Larger Dividend Than Last Year

Bâloise Holding AG (VTX:BALN) will increase its dividend from last year's comparable payment on the 3rd of May to CHF7.70. This takes the annual payment to 5.5% of the current stock price, which is about average for the industry.

View our latest analysis for Bâloise Holding

Bâloise Holding's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, the company was paying out 146% of what it was earning and 79% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 119.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 70%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Bâloise Holding Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CHF4.75 in 2014 to the most recent total annual payment of CHF7.70. This means that it has been growing its distributions at 4.9% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Bâloise Holding's earnings per share has shrunk at 14% a year over the past five years. 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Bâloise Holding's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Bâloise Holding will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Bâloise Holding that you should be aware of before investing. Is Bâloise Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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