LEM Holding SA (VTX:LEHN) will increase its dividend from last year's comparable payment on the 6th of July to CHF52.00. This makes the dividend yield about the same as the industry average at 2.3%.
View our latest analysis for LEM Holding
LEM Holding's Earnings Easily Cover The Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. At the time of the last dividend payment, LEM Holding was paying out a very large proportion of what it was earning and 98% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.
Looking forward, earnings per share is forecast to rise by 21.1% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 68% which brings it into quite a comfortable range.
LEM Holding Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from CHF25.00 total annually to CHF52.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
LEM Holding Could Grow Its Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that LEM Holding has been growing its earnings per share at 6.7% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.
The Dividend Could Prove To Be Unreliable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think LEM 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 LEM Holding that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.