Hugo Boss (ETR:BOSS) Is Paying Out A Larger Dividend Than Last Year

Hugo Boss AG (ETR:BOSS) will increase its dividend from last year's comparable payment on the 20th of May to €1.40. This will take the annual payment to 3.7% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Hugo Boss

Hugo Boss' Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Hugo Boss' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 42.3% over the next year. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €3.62 in 2015 to the most recent total annual payment of €1.40. This works out to be a decline of approximately 9.1% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Hugo Boss May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Hugo Boss hasn't seen much change in its earnings per share over the last five years. Growth of 0.8% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Hugo Boss that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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