Zug Estates Holding's (VTX:ZUGN) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Zug Estates Holding AG (VTX:ZUGN) has announced that it will be increasing its dividend by 6.8% on the 16th of April to CHF47.00, up from last year's comparable payment of CHF44.00. This takes the annual payment to 2.1% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Zug Estates Holding

Zug Estates Holding's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Zug Estates Holding was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Unless the company can turn things around, EPS could fall by 5.0% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 47%, which is definitely feasible to continue.

Zug Estates Holding Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was CHF15.00, compared to the most recent full-year payment of CHF44.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. It's not great to see that Zug Estates Holding's earnings per share has fallen at approximately 5.0% 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.

Our Thoughts On Zug Estates Holding's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. For example, we've identified 3 warning signs for Zug Estates Holding (2 are a bit unpleasant!) that you should be aware of before investing. 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.