Givaudan SA (VTX:GIVN) will increase its dividend from last year's comparable payment on the 27th of March to CHF68.00. Despite this raise, the dividend yield of 1.8% is only a modest boost to shareholder returns.
See our latest analysis for Givaudan
Givaudan's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. Before this announcement, Givaudan was paying out 70% of earnings, but a comparatively small 69% of free cash flows. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 25.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 58%, which is in the range that makes us comfortable with the sustainability of the dividend.
Givaudan 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 2014, the dividend has gone from CHF36.00 total annually to CHF68.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.6% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Givaudan Could Grow Its Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Givaudan has impressed us by growing EPS at 6.1% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
We Really Like Givaudan's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend 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 example, we've picked out 1 warning sign for Givaudan that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About SWX:GIVN
Givaudan
Manufactures, supplies, and sells fragrance, beauty, taste, and wellbeing products to the consumer goods industry.
Solid track record average dividend payer.
