Over the past 10 years The Swatch Group AG (VTX:UHR) has been paying dividends to shareholders. The stock currently pays out a dividend yield of 2.5%, and has a market cap of CHF16b. Should it have a place in your portfolio? Let’s take a look at Swatch Group in more detail.
View our latest analysis for Swatch Group
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
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Is their annual yield among the top 25% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share amount increased over the past?
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Is is able to pay the current rate of dividends from its earnings?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Swatch Group pass our checks?
Swatch Group has a trailing twelve-month payout ratio of 43%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 42%, leading to a dividend yield of around 3.1%. In addition to this, EPS should increase to CHF20.69.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of UHR it has increased its DPS from CHF0.85 to CHF7.5 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes UHR a true dividend rockstar.
Relative to peers, Swatch Group produces a yield of 2.5%, which is high for Luxury stocks but still below the market’s top dividend payers.
Next Steps:
With these dividend metrics in mind, I definitely rank Swatch Group as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three relevant aspects you should look at:
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Future Outlook: What are well-informed industry analysts predicting for UHR’s future growth? Take a look at our free research report of analyst consensus for UHR’s outlook.
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Valuation: What is UHR worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether UHR is currently mispriced by the market.
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Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.