Helvetia Holding (VTX:HELN) Is Increasing Its Dividend To CHF5.90

The board of Helvetia Holding AG (VTX:HELN) has announced that the dividend on 5th of May will be increased to CHF5.90, which will be 7.3% higher than last year's payment of CHF5.50 which covered the same period. Based on this payment, the dividend yield for the company will be 4.3%, which is fairly typical for the industry.

Check out our latest analysis for Helvetia Holding

Helvetia Holding's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Helvetia Holding was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 16.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Since 2013, the dividend has gone from CHF3.40 total annually to CHF5.50. This implies that the company grew its distributions at a yearly rate of about 4.9% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Helvetia Holding has been growing its earnings per share at 6.8% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

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.

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. For instance, we've picked out 1 warning sign for Helvetia Holding that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.