Givaudan (VTX:GIVN) Is Paying Out A Larger Dividend Than Last Year
The board of Givaudan SA (VTX:GIVN) has announced that it will be paying its dividend of CHF68.00 on the 27th of March, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.9%.
Check out our latest analysis for Givaudan
Givaudan's Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Givaudan's dividend made up quite a large proportion of earnings but only 57% of free cash flows. This leaves plenty of cash for reinvestment into the business.
Over the next year, EPS is forecast to expand by 26.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 58%, which is in the range that makes us comfortable with the sustainability of the dividend.
Givaudan Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was CHF47.00, compared to the most recent full-year payment of CHF68.00. This means that it has been growing its distributions at 3.8% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Givaudan Could Grow Its Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Givaudan has seen EPS rising for the last five years, at 6.1% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
Givaudan Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Givaudan that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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.
