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The board of Roche Holding AG (VTX:ROG) has announced that the dividend on 18th of March will be increased to CHF9.60, which will be 1.1% higher than last year's payment of CHF9.50 which covered the same period. This will take the annual payment to 4.1% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Roche Holding
Roche Holding's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Roche 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.
Looking forward, earnings per share is forecast to rise by 44.5% over the next year. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.
Roche Holding Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from CHF7.80 total annually to CHF9.50. This implies that the company grew its distributions at a yearly rate of about 2.0% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Roche 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 have grown at around 2.4% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 2.4% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.
We Really Like Roche Holding's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Roche Holding that investors need to be conscious of moving forward. Is Roche Holding not quite the opportunity you were looking for? Why not check out our selection of top 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.