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Ascom Holding (VTX:ASCN) Will Pay A Larger Dividend Than Last Year At CHF0.30

Ascom Holding AG (VTX:ASCN) will increase its dividend from last year's comparable payment on the 22nd of April to CHF0.30. This will take the annual payment to 3.8% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Ascom Holding

Ascom Holding'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. The last dividend was quite easily covered by Ascom Holding's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

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The next year is set to see EPS grow by 45.7%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

historic-dividend
historic-dividend

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was CHF0.40, compared to the most recent full-year payment of CHF0.30. The dividend has shrunk at around 2.8% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Ascom Holding May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Ascom Holding's earnings per share has shrunk at approximately 4.0% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Ascom Holding's Dividend

Overall, we always like to see the dividend being raised, but we don't think Ascom Holding will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Investors generally tend to favour 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. Taking the debate a bit further, we've identified 1 warning sign for Ascom Holding 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.