Assessing BVZ Holding's (VTX:BVZN) Dividend Attractiveness Amid Declining ROCE

The dividend yield of BVZ Holding (VTX:BVZN) currently stands at 1.73%, with a payout ratio of 15% to 16.5% of earnings, indicating a conservative and well-covered dividend policy [1]. Despite a declining Return on Capital Employed (ROCE) from 7.8% to 5.0% over the past five years [2], the company has maintained a trajectory of dividend growth, increasing payments from CHF15.00 in 2023 to CHF18.00 in 2025 [3]. This resilience raises critical questions about the interplay between capital allocation efficiency and dividend sustainability in a company operating in the transportation sector.

Capital Allocation and ROCE Dynamics

BVZ Holding’s declining ROCE suggests diminishing returns on reinvested capital, a trend that typically signals inefficiency. However, the company has increased its capital employed, reflecting a deliberate strategy to reinvest for long-term growth [2]. This approach aligns with its broader ESG goals, including a commitment to renewable energy by 2030 and net-zero emissions by 2050 [4]. While these investments may not yet translate into improved ROCE, they underscore a focus on sustainable value creation rather than short-term profitability.

The company’s conservative payout ratio—distributing only 9.5% of free cash flow—provides a buffer against earnings volatility [5]. This financial discipline is critical given the flat sales growth in the last 12 months and a 17.8% decline in 2024 earnings compared to 2023 [6]. By prioritizing capital preservation and reinvestment, BVZ Holding appears to balance immediate shareholder returns with long-term operational resilience.

Dividend Sustainability Amid Earnings Volatility

BVZ Holding’s dividend history reveals a pattern of stability, with annual payments in 9 of the past 10 years [7]. The 2025 dividend of CHF18.00 per share, payable on April 17, 2025, reflects a yield of 1.73% [8]. While earnings per share (EPS) have remained flat over the past five years [5], the company’s net margin of 10.5% and a 36.3% average annual earnings growth rate over five years [9] suggest robust operational efficiency. These metrics, combined with a payout ratio below 20%, reinforce the dividend’s sustainability even amid declining ROCE.

However, the disconnect between reinvestment and ROCE improvement remains a concern. The company’s Return on Invested Capital (ROIC) of 4.18% exceeds its Weighted Average Cost of Capital (WACC) of 3.03% [10], indicating marginal excess returns. Yet, with ROCE lagging behind the Transportation industry average of 7.1% [2], the effectiveness of capital allocation in driving profitability remains unproven.

Strategic Implications for Investors

BVZ Holding’s management has not explicitly outlined strategies to reverse the ROCE decline, but its focus on ESG integration and long-term reinvestment implies a prioritization of structural over immediate gains [4]. For dividend-focused investors, the key question is whether these investments will eventually enhance returns or merely delay profitability. The company’s ability to maintain a 1.73% yield while navigating a challenging earnings environment demonstrates its commitment to shareholder returns, but the lack of clear ROCE improvement could limit future dividend growth.

Conclusion

BVZ Holding’s dividend attractiveness lies in its conservative payout ratio, historical consistency, and alignment with ESG-driven reinvestment. While declining ROCE raises concerns about capital efficiency, the company’s focus on long-term sustainability and operational resilience provides a buffer against short-term volatility. Investors should monitor future ROCE trends and the impact of ESG initiatives on profitability, but for now, the dividend appears well-supported by both earnings and cash flow.

Source:
[1] BVZ Holding (SWX:BVZN) Dividend Yield, History and Growth [https://simplywall.st/stocks/ch/transportation/vtx-bvzn/bvz-holding-shares/dividend]
[2] BVZ Holding's (VTX:BVZN) Returns On Capital Not Reflecting ... [https://finance.yahoo.com/news/bvz-holdings-vtx-bvzn-returns-041437599.html]
[3] BVZ Holding AG Dividend History & Metrics [https://www.wisesheets.io/BVZN.SW/dividend-history]
[4] “On Track for Sustainability”: How BVZ Holding AG Embeds Sustainability in its Strategy and Region [https://www.myclimate.org/en/information/news-press/news/newsdetail/on-track-for-sustainability-how-bvz-holding-ag-embeds-sustainability-in-its-strategy-and-region/]
[5] How the Trade War is Reshaping the Global Economy [https://simplywall.st/stocks/ch/transportation/vtx-bvzn/bvz-holding-shares/news/heres-what-we-like-about-bvz-holdings-vtxbvzn-upcoming-divid]
[6] BVZ Holding AG (SWX:BVZN) Income Statement - Yahoo Finance [https://finance.yahoo.com/quote/BVZN.SW/financials]
[7] BVZ Holding AG - WKN 924111, ISIN CH0008207356 [https://divvydiary.com/en/bvz-holding-stock-CH0008207356]
[8] BVZ Holding AG (BVZN) Stock Dividend History & Date 2025 [https://www.investing.com/equities/bvz-holding-ag-dividends]
[9] BVZ Holding Past Earnings Performance [https://simplywall.st/stocks/ch/transportation/vtx-bvzn/bvz-holding-shares/past]
[10] BVZ Holding AG (CHIX:BVZNZ) WACC % [https://www.gurufocus.com/term/wacc/CHIX:BVZNZ]