VEEM's (ASX:VEE) Shareholders Will Receive A Smaller Dividend Than Last Year

VEEM Ltd (ASX:VEE) is reducing its dividend to A$0.0023 on the 17th of Aprilwhich is 70% less than last year's comparable payment of A$0.0077. Based on this payment, the dividend yield will be 1.7%, which is lower than the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. VEEM's stock price has reduced by 37% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

Check out our latest analysis for VEEM

VEEM's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, based ont he last payment, VEEM was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

The next year is set to see EPS grow by 85.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 1.8% by next year, which is in a pretty sustainable range.

VEEM's Dividend Has Lacked Consistency

VEEM has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of A$0.0123 in 2018 to the most recent total annual payment of A$0.0154. This means that it has been growing its distributions at 3.3% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

We Could See VEEM's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. VEEM has impressed us by growing EPS at 9.0% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for VEEM's prospects of growing its dividend payments in the future.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for VEEM that investors should know about before committing capital to this stock. Is VEEM not quite the opportunity you were looking for? Why not check out our selection of top 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.