Allreal Holding (VTX:ALLN) Will Pay A Dividend Of CHF7.00

The board of Allreal Holding AG (VTX:ALLN) has announced that it will pay a dividend on the 2nd of May, with investors receiving CHF7.00 per share. Based on this payment, the dividend yield will be 3.8%, which is fairly typical for the industry.

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

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Allreal Holding's dividend was only 55% of earnings, however it was paying out 142% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to fall by 19.3%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 70%, which is comfortable for the company to continue in the future.

View our latest analysis for Allreal Holding

Allreal Holding 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 2015, the annual payment back then was CHF5.50, compared to the most recent full-year payment of CHF7.00. This means that it has been growing its distributions at 2.4% per annum 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 Achieve

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. In the last five years, Allreal Holding's earnings per share has shrunk at approximately 3.5% per annum. 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.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Allreal Holding (of which 2 are potentially serious!) you should know about. Is Allreal Holding not quite the opportunity you were looking for? Why not check out our selection of top 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.