Swiss Life Holding (VTX:SLHN) Is Increasing Its Dividend To CHF30.00

The board of Swiss Life Holding AG (VTX:SLHN) has announced that it will be paying its dividend of CHF30.00 on the 5th of May, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 5.3%, which is fairly typical for the industry.

See our latest analysis for Swiss Life Holding

Swiss Life Holding's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Swiss Life Holding's dividend was only 63% of earnings, however it was paying out 98% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 16.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 61%, which is in the range that makes us comfortable with the sustainability of the dividend.

Swiss Life Holding Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CHF4.50 in 2013, and the most recent fiscal year payment was CHF30.00. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See Swiss Life Holding's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. Swiss Life Holding has impressed us by growing EPS at 9.6% per 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 Swiss Life Holding's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Swiss Life Holding's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Swiss Life Holding is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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. 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.