Yahoo Finance Leonteq (VTX:LEON) Will Pay A Larger Dividend Than Last Year At CHF4.00
Leonteq AG's (VTX:LEON) periodic dividend will be increasing on the 5th of April to CHF4.00, with investors receiving 33% more than last year's CHF3.00. This makes the dividend yield 5.8%, which is above the industry average.
Check out our latest analysis for Leonteq
Leonteq's Earnings Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Leonteq's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to fall by 44.7%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 68%, which is comfortable for the company to continue in the future.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of CHF0.50 in 2013 to the most recent total annual payment of CHF3.00. This means that it has been growing its distributions at 20% per annum over that time. Leonteq has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Leonteq has grown earnings per share at 33% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Leonteq Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Leonteq is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Leonteq has 3 warning signs (and 2 which can't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
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