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Hugo Boss AG (ETR:BOSS) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of May to €1.40. This makes the dividend yield 4.2%, which is above the industry average.
Hugo Boss' Payment Could Potentially Have Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Hugo Boss was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 41.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.
View our latest analysis for Hugo Boss
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of €3.62 in 2015 to the most recent total annual payment of €1.40. This works out to be a decline of approximately 9.1% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Hugo Boss May Find It Hard To Grow The Dividend
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. However, Hugo Boss' EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 0.8% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Our Thoughts On Hugo Boss' Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
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 instance, we've picked out 1 warning sign for Hugo Boss that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.