Chr. Hansen Holding's (CPH:CHR) Shareholders Will Receive A Bigger Dividend Than Last Year

Chr. Hansen Holding A/S' (CPH:CHR) dividend will be increasing from last year's payment of the same period to €7.04 on 28th of November. Even though the dividend went up, the yield is still quite low at only 1.6%.

Our analysis indicates that CHR is potentially overvalued!

Chr. Hansen Holding Is Paying Out More Than It Is Earning

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Chr. Hansen Holding was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 45.0%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was €0.39 in 2012, and the most recent fiscal year payment was €0.945. This implies that the company grew its distributions at a yearly rate of about 9.3% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Chr. Hansen Holding's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Chr. Hansen Holding is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Chr. Hansen Holding's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Chr. Hansen Holding that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.