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Bucher Industries AG's (VTX:BUCN) dividend will be increasing from last year's payment of the same period to CHF13.00 on 25th of April. This will take the dividend yield to an attractive 3.1%, providing a nice boost to shareholder returns.
View our latest analysis for Bucher Industries
Bucher Industries' Dividend Is Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Bucher Industries' dividend was only 40% of earnings, however it was paying out 200% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Looking forward, earnings per share is forecast to fall by 6.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 47%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Bucher Industries Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was CHF5.00 in 2013, and the most recent fiscal year payment was CHF13.00. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Bucher Industries has been growing its earnings per share at 14% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Bucher Industries' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
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. Case in point: We've spotted 3 warning signs for Bucher Industries (of which 2 are a bit concerning!) you should know about. Is Bucher Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.