Swiss Prime Site's (VTX:SPSN) Dividend Will Be Increased To CHF3.45

Swiss Prime Site AG (VTX:SPSN) will increase its dividend from last year's comparable payment on the 25th of March to CHF3.45. This makes the dividend yield about the same as the industry average at 3.2%.

See our latest analysis for Swiss Prime Site

Swiss Prime Site's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before this announcement, Swiss Prime Site was paying out 74% of earnings, but a comparatively small 66% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 30.3% over the next year. If the dividend continues on this path, the payout ratio could be 56% by next year, which we think can be pretty sustainable going forward.

Swiss Prime Site Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from CHF3.60 total annually to CHF3.45. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

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. Swiss Prime Site's earnings per share has shrunk at 10% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Swiss Prime Site has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.