Sika's (VTX:SIKA) Dividend Will Be Increased To CHF3.30

The board of Sika AG (VTX:SIKA) has announced that it will be paying its dividend of CHF3.30 on the 3rd of April, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.3%, which is below the industry average.

Check out our latest analysis for Sika

Sika's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Sika was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 55.6%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

Sika Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of CHF2.05 in 2019 to the most recent total annual payment of CHF3.30. This works out to be a compound annual growth rate (CAGR) of approximately 10.0% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

We Could See Sika's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Sika has grown earnings per share at 7.1% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Sika 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.