Geberit AG (VTX:GEBN) will increase its dividend on the 23rd of April to CHF12.70, which is 0.8% higher than last year's payment from the same period of CHF12.60. Based on this payment, the dividend yield for the company will be 2.4%, which is fairly typical for the industry.

View our latest analysis for Geberit

Geberit's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Geberit's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 6.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 69% by next year, which is in a pretty sustainable range.

Geberit Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was CHF7.50, compared to the most recent full-year payment of CHF12.60. This works out to be a compound annual growth rate (CAGR) of approximately 5.3% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Geberit May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 2.3% per annum over the last five years, which admittedly is a bit slow. Growth of 2.3% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Geberit 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Geberit that you should be aware of before investing. 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.