VP Bank AG (VTX:VPBN) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 28th of April will not receive the dividend, which will be paid on the 30th of April.
VP Bank’s next dividend payment will be CHF5.50 per share. Last year, in total, the company distributed CHF5.50 to shareholders. Based on the last year’s worth of payments, VP Bank has a trailing yield of 4.4% on the current stock price of CHF126. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it’s growing.
Check out our latest analysis for VP Bank
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. VP Bank paid out a comfortable 45% of its profit last year.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
SWX:VPBN Historical Dividend Yield April 24th 2020
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That’s why it’s comforting to see VP Bank’s earnings have been skyrocketing, up 29% per annum for the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. VP Bank has delivered an average of 4.6% per year annual increase in its dividend, based on the past ten years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because VP Bank is keeping back more of its profits to grow the business.
Final Takeaway
Has VP Bank got what it takes to maintain its dividend payments? Companies like VP Bank that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term – as long as it’s done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating VP Bank more closely.
While it’s tempting to invest in VP Bank for the dividends alone, you should always be mindful of the risks involved. For example, VP Bank has 3 warning signs (and 1 which is significant) we think you should know about.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.
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