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Emmi AG's (VTX:EMMN) dividend will be increasing from last year's payment of the same period to CHF14.50 on 19th of April. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.
Check out our latest analysis for Emmi
Emmi's Earnings Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Based on the last dividend, Emmi is earning enough to cover the payment, but then it makes up 2,054% of 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.
Over the next year, EPS is forecast to expand by 27.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.
Emmi Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was CHF3.40 in 2013, and the most recent fiscal year payment was CHF14.50. This implies that the company grew its distributions at a yearly rate of about 16% 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.
Emmi 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. Earnings have grown at around 2.5% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 2.5% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Emmi will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for Emmi for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.