Helvetia Holding (VTX:HELN) Has Announced That It Will Be Increasing Its Dividend To CHF5.90

Helvetia Holding AG's (VTX:HELN) dividend will be increasing from last year's payment of the same period to CHF5.90 on 5th of May. This takes the annual payment to 4.5% of the current stock price, which is about average for the industry.

View our latest analysis for Helvetia Holding

Helvetia Holding's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Helvetia Holding'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.

The next year is set to see EPS grow by 16.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 50% by next year, which is in a pretty sustainable range.

Helvetia Holding Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was CHF3.40 in 2013, and the most recent fiscal year payment was CHF5.90. This means that it has been growing its distributions at 5.7% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Helvetia Holding has impressed us by growing EPS at 6.3% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Helvetia Holding's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Helvetia Holding that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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