Swisscom's (VTX:SCMN) Dividend Will Be CHF22.00

The board of Swisscom AG (VTX:SCMN) has announced that it will pay a dividend on the 5th of April, with investors receiving CHF22.00 per share. This means that the annual payment will be 4.1% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Swisscom

Swisscom's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Swisscom was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 16.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 72%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Swisscom Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from CHF21.00 in 2012 to the most recent annual payment of CHF22.00. Dividend payments have been growing, but very slowly over the period. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 4.8% per annum over the last five years, which admittedly is a bit slow. Swisscom is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

We Really Like Swisscom's Dividend

Overall, we like to see the dividend staying consistent, and we think Swisscom might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Swisscom (of which 1 is a bit concerning!) you should know about. We have also put together a list of global stocks with a solid dividend.

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