Landis+Gyr Group (VTX:LAND) Is Paying Out A Larger Dividend Than Last Year

Landis+Gyr Group AG (VTX:LAND) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of June to $2.20. Based on this payment, the dividend yield for the company will be 2.7%, which is fairly typical for the industry.

See our latest analysis for Landis+Gyr Group

Landis+Gyr Group's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Landis+Gyr Group's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 34.7% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 45%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Landis+Gyr Group's Dividend Has Lacked Consistency

It's comforting to see that Landis+Gyr Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of $2.25 in 2018 to the most recent total annual payment of $2.43. This implies that the company grew its distributions at a yearly rate of about 1.5% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Landis+Gyr Group has impressed us by growing EPS at 36% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Landis+Gyr Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Landis+Gyr Group's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Landis+Gyr Group is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Landis+Gyr Group (1 is a bit unpleasant!) that you should be aware of before investing. 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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