EMS-CHEMIE HOLDING (VTX:EMSN) Will Pay A Larger Dividend Than Last Year At CHF21.00

EMS-CHEMIE HOLDING AG's (VTX:EMSN) dividend will be increasing from last year's payment of the same period to CHF21.00 on 18th of August. This will take the annual payment to 3.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for EMS-CHEMIE HOLDING

EMS-CHEMIE HOLDING's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, EMS-CHEMIE HOLDING was paying out a very large proportion of what it was earning and 112% 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.

Over the next year, EPS is forecast to expand by 23.6%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 76% which is a bit high but can definitely be sustainable.

EMS-CHEMIE HOLDING Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was CHF6.50, compared to the most recent full-year payment of CHF21.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 4.2% a year for the past five years, which isn't massive but still better than seeing them shrink. EMS-CHEMIE 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. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On EMS-CHEMIE HOLDING's Dividend

In summary, while it's always good to see the dividend being raised, we don't think EMS-CHEMIE HOLDING's payments are rock solid. While EMS-CHEMIE 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for EMS-CHEMIE HOLDING that you should be aware of before investing. 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.