SoftwareONE Holding (VTX:SWON) Has Announced That It Will Be Increasing Its Dividend To CHF0.35

SoftwareONE Holding AG (VTX:SWON) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of May to CHF0.35. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

Check out our latest analysis for SoftwareONE Holding

SoftwareONE Holding's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Despite not generating a profit, SoftwareONE Holding is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, so there isn't too much pressure on the dividend.

SoftwareONE Holding Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The annual payment during the last 3 years was CHF0.21 in 2020, and the most recent fiscal year payment was CHF0.35. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

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 SoftwareONE Holding's earnings per share has fallen at approximately 9.4% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

We're Not Big Fans Of SoftwareONE Holding's Dividend

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, the dividend is not reliable enough to make this a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for SoftwareONE Holding that investors should know about before committing capital to this stock. 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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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.