Forbo Holding AG's (VTX:FORN) Could Be A Buy For Its Upcoming Dividend
Forbo Holding AG (VTX:FORN) stock is about to trade ex-dividend in 1 days time. This means that investors who purchase shares on or after the 8th of April will not receive the dividend, which will be paid on the 14th of April.
Forbo Holding's next dividend payment will be CHF23.00 per share. Last year, in total, the company distributed CHF23.00 to shareholders. Looking at the last 12 months of distributions, Forbo Holding has a trailing yield of approximately 2.0% on its current stock price of CHF1156. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Forbo Holding has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Forbo Holding
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Forbo Holding paying out a modest 27% of its earnings. A useful secondary check can be to evaluate whether Forbo Holding generated enough free cash flow to afford its dividend. Luckily it paid out just 23% of its free cash flow last year.
It's positive to see that Forbo Holding's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Forbo Holding earnings per share are up 6.9% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last ten years, Forbo Holding has lifted its dividend by approximately 14% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Should investors buy Forbo Holding for the upcoming dividend? Earnings per share growth has been growing somewhat, and Forbo Holding is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Forbo Holding is being conservative with its dividend payouts and could still perform reasonably over the long run. Forbo Holding looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
So while Forbo Holding looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Forbo Holding that we strongly recommend you have a look at before investing in the company.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
