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Bâloise Holding AG (VTX:BALN) will increase its dividend from last year's comparable payment on the 5th of May to CHF7.40. This takes the annual payment to 5.2% of the current stock price, which is about average for the industry.
Check out our latest analysis for Bâloise Holding
Bâloise Holding's Payment Has Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Bâloise Holding's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
The next year is set to see EPS grow by 25.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which is in the range that makes us comfortable with the sustainability of the dividend.
Bâloise Holding Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from CHF4.50 total annually to CHF7.40. This works out to be a compound annual growth rate (CAGR) of approximately 5.1% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Bâloise Holding hasn't seen much change in its earnings per share over the last five years. Bâloise Holding is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On Bâloise Holding's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Bâloise Holding is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Bâloise Holding that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.