NV Bekaert SA (EBR:BEKB) will increase its dividend on the 16th of May to €1.05. Even though the dividend went up, the yield is still quite low at only 3.0%.
NV Bekaert's Earnings Easily Cover the Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, NV Bekaert was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
EPS is set to fall by 28.5% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 20%, which is comfortable for the company to continue in the future.
The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was €1.17 in 2012, and the most recent fiscal year payment was €1.50. This works out to be a compound annual growth rate (CAGR) of approximately 2.5% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see NV Bekaert has been growing its earnings per share at 31% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
NV Bekaert Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for NV Bekaert you should be aware of, and 1 of them is concerning. Is NV Bekaert not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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