Givaudan SA (VTX:GIVN) will increase its dividend from last year's comparable payment on the 27th of March to CHF68.00. This takes the annual payment to 1.7% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Givaudan

Givaudan's Earnings Easily Cover The Distributions

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 27.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.

Givaudan Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was CHF47.00 in 2014, and the most recent fiscal year payment was CHF68.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.8% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

We Could See Givaudan's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. Givaudan has impressed us by growing EPS at 6.1% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

We Really Like Givaudan's Dividend

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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Givaudan that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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