Swiss Life Holding (VTX:SLHN) Has Announced That It Will Be Increasing Its Dividend To CHF35.00

Swiss Life Holding AG (VTX:SLHN) has announced that it will be increasing its periodic dividend on the 20th of May to CHF35.00, which will be 6.1% higher than last year's comparable payment amount of CHF33.00. This makes the dividend yield about the same as the industry average at 4.5%.

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Swiss Life Holding's Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Swiss Life Holding's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 1,681% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Earnings per share is forecast to rise by 12.5% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 85% which is a bit high but can definitely be sustainable.

Check out our latest analysis for Swiss Life Holding

Swiss Life Holding Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was CHF6.50, compared to the most recent full-year payment of CHF33.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 3.1% a year for the past five years, which isn't massive but still better than seeing them shrink. Swiss Life Holding's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Swiss Life Holding will make a great income stock. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Swiss Life Holding that investors need to be conscious of moving forward. Is Swiss Life Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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