Helvetia Holding (VTX:HELN) Is Increasing Its Dividend To CHF5.50

The board of Helvetia Holding AG (VTX:HELN) has announced that it will be increasing its dividend by 10% on the 5th of May to CHF5.50. This makes the dividend yield about the same as the industry average at 4.5%.

View our latest analysis for Helvetia Holding

Helvetia Holding's Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Helvetia 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.

The next year is set to see EPS grow by 13.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% 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 dividend has gone from CHF3.20 in 2012 to the most recent annual payment of CHF5.00. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. 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.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Helvetia Holding has grown earnings per share at 8.4% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

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. While Helvetia Holding is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Helvetia Holding that investors should take into consideration. Is Helvetia Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.