COLTENE Holding AG (VTX:CLTN) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 6th of April, you won't be eligible to receive this dividend, when it is paid on the 8th of April.
COLTENE Holding's next dividend payment will be CHF3.00 per share. Last year, in total, the company distributed CHF3.00 to shareholders. Based on the last year's worth of payments, COLTENE Holding has a trailing yield of 4.8% on the current stock price of CHF62. If you buy this business for its dividend, you should have an idea of whether COLTENE Holding's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for COLTENE Holding
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 89% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. COLTENE Holding paid out more free cash flow than it generated - 171%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
While COLTENE Holding's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were COLTENE Holding to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that COLTENE Holding's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.