PSP Swiss Property (VTX:PSPN) Is Increasing Its Dividend To CHF3.85

PSP Swiss Property AG's (VTX:PSPN) dividend will be increasing from last year's payment of the same period to CHF3.85 on 10th of April. Based on this payment, the dividend yield for the company will be 3.4%, which is fairly typical for the industry.

View our latest analysis for PSP Swiss Property

PSP Swiss Property's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, PSP Swiss Property's dividend made up quite a large proportion of earnings but only 64% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 48.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 58%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

PSP Swiss Property 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 dividend has gone from an annual total of CHF3.25 in 2014 to the most recent total annual payment of CHF3.85. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that PSP Swiss Property's earnings per share has fallen at approximately 7.6% per year over the past 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On PSP Swiss Property's Dividend

In summary, while it's always good to see the dividend being raised, we don't think PSP Swiss Property's payments are rock solid. 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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for PSP Swiss Property you should be aware of, and 1 of them doesn't sit too well with us. 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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