BKW's (VTX:BKW) Upcoming Dividend Will Be Larger Than Last Year's

BKW AG (VTX:BKW) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of May to CHF3.70. Although the dividend is now higher, the yield is only 2.4%, which is below the industry average.

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BKW's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, BKW was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 9.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 38%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for BKW

BKW 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 an annual total of CHF1.60 in 2015 to the most recent total annual payment of CHF3.70. This implies that the company grew its distributions at a yearly rate of about 8.7% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

BKW Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that BKW has grown earnings per share at 9.7% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

BKW Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that BKW is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for BKW that investors should take into consideration. Is BKW not quite the opportunity you were looking for? Why not check out our selection of top 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.