The board of Landis+Gyr Group AG (VTX:LAND) has announced that it will be paying its dividend of $2.20 on the 28th of June, an increased payment from last year’s comparable dividend. This will take the dividend yield to an attractive 2.7%, providing a nice boost to shareholder returns.
Check out our latest analysis for Landis+Gyr Group
Landis+Gyr Group’s Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn’t matter if the payment isn’t sustainable. Based on the last payment, Landis+Gyr Group was earning enough to cover the dividend, but free cash flows weren’t positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
EPS is set to fall by 36.0% over the next 12 months. If the dividend continues along with recent trends, we estimate the payout ratio could be 45%, which we consider to be quite comfortable, with most of the company’s earnings left over to grow the business in the future.
Landis+Gyr Group’s Dividend Has Lacked Consistency
Landis+Gyr Group has been paying dividends for a while, but the track record isn’t stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 5 years was $2.25 in 2018, and the most recent fiscal year payment was $2.42. This means that it has been growing its distributions at 1.4% per annum over that time. We’re glad to see the dividend has increased, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it’s even more important to see if earnings per share is growing. Landis+Gyr Group has seen EPS rising for the last five years, at 36% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also makes it very easy for it to grow the dividend.
in Summary
In summary, while it’s always good to see the dividend being raised, we don’t think Landis+Gyr Group’s payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
Investors generally tend to favor companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Landis+Gyr Group has 2 warning signs (and 1 which is potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try ours collection of strong dividend payers.
Have feedback on this article? Concerned about the content? get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift Card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here