H. Lundbeck (CPH:HLUN B) Will Pay A Larger Dividend Than Last Year At DKK0.95

H. Lundbeck A/S (CPH:HLUN B) will increase its dividend from last year's comparable payment on the 31st of March to DKK0.95. The payment will take the dividend yield to 2.4%, which is in line with the average for the industry.

See our latest analysis for H. Lundbeck

H. Lundbeck's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, H. Lundbeck was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 35.8%. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

H. Lundbeck Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of DKK0.58 in 2023 to the most recent total annual payment of DKK0.95. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. H. Lundbeck has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that H. Lundbeck has been growing its earnings per share at 6.4% a year over the past five years. H. Lundbeck definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On H. Lundbeck'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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for H. Lundbeck 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.