In This Article:
Cembra Money Bank AG (VTX:CMBN) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of April to CHF3.95. This makes the dividend yield 5.4%, which is above the industry average.
Check out our latest analysis for Cembra Money Bank
Cembra Money Bank's Dividend Forecasted To Be Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
Cembra Money Bank has a good history of paying out dividends, with its current track record at 9 years. Past distributions do not necessarily guarantee future ones, but Cembra Money Bank's payout ratio of 68% is a good sign for current shareholders as this means that earnings decently cover dividends.
Looking forward, EPS is forecast to rise by 11.1% over the next 3 years. Analysts estimate the future payout ratio will be 69% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
Cembra Money Bank Is Still Building Its Track Record
It is great to see that Cembra Money Bank has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2014, the annual payment back then was CHF2.85, compared to the most recent full-year payment of CHF3.95. This means that it has been growing its distributions at 3.7% per annum over that time. Cembra Money Bank hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
Cembra Money Bank May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Cembra Money Bank has only grown its earnings per share at 2.4% per annum over the past five years. Cembra Money Bank is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.
Our Thoughts On Cembra Money Bank's Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Cembra Money Bank (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Cembra Money Bank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.