Holcim (VTX:HOLN) Is Paying Out A Larger Dividend Than Last Year

Holcim Ltd (VTX:HOLN) will increase its dividend on the 12th of May to CHF2.20. This will take the annual payment to 5.0% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Holcim

Holcim's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Holcim's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 13.8% over the next year. If the dividend continues on this path, the payout ratio could be 55% by next year, which we think can be pretty sustainable going forward.

Holcim 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. The first annual payment during the last 10 years was CHF0.95 in 2012, and the most recent fiscal year payment was CHF2.50. This means that it has been growing its distributions at 10% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Holcim has been growing its earnings per share at 5.4% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Holcim's Dividend

Overall, a dividend increase is always good, and we think that Holcim is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Holcim that investors should know about before committing capital to this stock. 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.