Vaud Cantonal Bank (VTX:BCVN) will increase its dividend on May 11 to CHF 3.70. This will bring the annual payout from 4.7% to 4.7% of the share price, which is higher than most companies in the industry pay.
Read our latest analysis for Banque Cantonale Vaudoise
Banque Cantonale Vaudoise’s dividend is well covered by profits
While it’s good to have a high dividend yield, we also have to ask ourselves if the payout is sustainable. The last payment was 84% of revenue, but cash flow was much higher. Since the dividend only pays out cash to the shareholders, we care more about the cash payout ratio from which we can see that there is plenty left to reinvest in the business.
Earnings per share could increase by 4.2% over the next year if things continue in the same direction as in recent years. If recent dividend trends continue, the 12-month payout ratio could be 89%, which is a bit high but can certainly be sustainable.
Banque Cantonale Vaudoise has a solid balance sheet
The company has a long history of paying stable dividends. Since 2012, the dividend has increased from CHF 3.20 to CHF 3.70. This implies that the company has increased its distributions at an annual rate of approximately 1.5% over this period. Dividends have been growing relatively slowly, which isn’t great, but some investors may appreciate the relative consistency of the dividend.
Dividend growth can be hard to achieve
Investors who have held shares of the company for the past few years will be pleased with the dividend income they have received. Earnings per share climbed 4.2% annually. Profits are not growing at all quickly and the company pays most of its profits in the form of dividends. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often choose to pay a larger dividend instead. This is why many mature companies often have higher dividend yields.
Our opinion on the Banque Cantonale Vaudoise dividend
In summary, while it’s always good to see the dividend increase, we don’t think Banque Cantonale Vaudoise’s payouts are strong. The company has brought in plenty of cash to cover the dividend, but we don’t necessarily think that makes it a great dividend-paying stock. We would be a bit cautious to rely on this stock primarily for dividend income.
Investors generally tend to favor companies with a consistent and stable dividend policy as opposed to those with an irregular one. Yet investors must consider a host of other factors, aside from dividend payments, when analyzing a company. To this end, Banque Cantonale Vaudoise has 2 warning signs (and 1 which is potentially serious) that we think you should know about. If you are a dividend investor, you can also consult our curated list of high yielding dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.