Zug Estates Holding AG (VTX:ZUGN) Pays A CHF41.00 Dividend In Just Three Days

It looks like Zug Estates Holding AG (VTX:ZUGN) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Zug Estates Holding's shares on or after the 12th of April, you won't be eligible to receive the dividend, when it is paid on the 14th of April.

The company's next dividend payment will be CHF41.00 per share, on the back of last year when the company paid a total of CHF41.00 to shareholders. Calculating the last year's worth of payments shows that Zug Estates Holding has a trailing yield of 2.3% on the current share price of CHF1810. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Zug Estates Holding can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Zug Estates Holding

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Zug Estates Holding paid out 53% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Zug Estates Holding generated enough free cash flow to afford its dividend. Dividends consumed 51% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Zug Estates Holding's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Zug Estates Holding earnings per share are up 2.6% per annum over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, nine years ago, Zug Estates Holding has lifted its dividend by approximately 12% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Zug Estates Holding worth buying for its dividend? Earnings per share have been growing modestly and Zug Estates Holding paid out a bit over half of its earnings and free cash flow last year. In summary, it's hard to get excited about Zug Estates Holding from a dividend perspective.

If you want to look further into Zug Estates Holding, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 4 warning signs for Zug Estates Holding (of which 2 shouldn't be ignored!) you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.