The board of Zug Estates Holding AG (VTX:ZUGN) has announced that it will be paying its dividend of CHF41.00 on the 14th of April, an increased payment from last year's comparable dividend. This takes the annual payment to 2.2% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for Zug Estates Holding
Zug Estates Holding's Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Zug Estates Holding was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to fall by 5.6%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 61%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Zug Estates Holding Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 9 years was CHF15.00 in 2014, and the most recent fiscal year payment was CHF41.00. This means that it has been growing its distributions at 12% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
Zug Estates Holding May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 2.6% per year. Zug Estates Holding 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.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
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. Just as an example, we've come across 4 warning signs for Zug Estates Holding you should be aware of, and 2 of them are significant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.