Roche Holding (VTX:ROG) Will Pay A Larger Dividend Than Last Year At CHF9.70

The board of Roche Holding AG (VTX:ROG) has announced that it will be paying its dividend of CHF9.70 on the 31st of March, an increased payment from last year's comparable dividend. This makes the dividend yield 3.2%, which is above the industry average.

See our latest analysis for Roche Holding

Roche Holding's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Roche Holding's dividend made up quite a large proportion of earnings but only 51% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 109.9% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 45% which brings it into quite a comfortable range.

Roche Holding Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was CHF8.00, compared to the most recent full-year payment of CHF9.70. This works out to be a compound annual growth rate (CAGR) of approximately 1.9% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Roche Holding has seen earnings per share falling at 8.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Roche Holding's Dividend

Overall, we always like to see the dividend being raised, but we don't think Roche Holding will make a great income stock. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Roche Holding is a great stock to add to your portfolio if income is your focus.

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 instance, we've picked out 4 warning signs for Roche Holding that investors should take into consideration. 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.