Swisscom AG’s board declared a dividend payment of CHF22.00 per share, scheduled for April 4th, which corresponds to a dividend yield of 4.3 per cent, a figure that aligns with industry norms, Bloomberg reported on Sunday.
Indeed, solid dividend yields are beneficial only if they’re sustainable.
Before this announcement, Swisscom’s dividend was well supported by both its cash flow and earnings, which suggests that the company is reinvesting a significant portion of its earnings back into the business to stimulate growth.
The company anticipates a 2.2 per cent drop in EPS next year. If the dividend continues its current trend, the company is expected to have a sustainable payout ratio of 68 per cent.
The company, with its long-standing record of consistent dividend payments, has seen little change in its dividend over the past decade, demonstrating undeniable stability, albeit with relatively subdued growth.
Based on its dividend history, some investors are eager to purchase the company’s stock. Over the past five years, earnings have grown at a somewhat slow rate of 2.3 per cent per year.
Swisscom is having difficulty identifying profitable investments, leading to higher returns for shareholders. While this isn’t necessarily negative, it suggests that future dividend growth may not be rapid.
