CPH Chemie + Papier Holding AG (VTX:CPHN) Passed Our Checks, And It's About To Pay A CHF1.80 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CPH Chemie + Papier Holding AG (VTX:CPHN) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 22nd of March to receive the dividend, which will be paid on the 24th of March.

CPH Chemie + Papier Holding's next dividend payment will be CHF1.80 per share, on the back of last year when the company paid a total of CHF1.80 to shareholders. Based on the last year's worth of payments, CPH Chemie + Papier Holding stock has a trailing yield of around 2.7% on the current share price of CHF65.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for CPH Chemie + Papier Holding

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. CPH Chemie + Papier Holding paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 30% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see CPH Chemie + Papier Holding has grown its earnings rapidly, up 55% a year for the past five years. CPH Chemie + Papier Holding is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past nine years, CPH Chemie + Papier Holding has increased its dividend at approximately 12% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy CPH Chemie + Papier Holding for the upcoming dividend? CPH Chemie + Papier Holding has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

In light of that, while CPH Chemie + Papier Holding has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for CPH Chemie + Papier Holding (of which 1 can't be ignored!) you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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