Bureau Veritas (EPA:BVI) Has Announced That It Will Be Increasing Its Dividend To €0.77

Bureau Veritas SA (EPA:BVI) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of July to €0.77. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

View our latest analysis for Bureau Veritas

Bureau Veritas' Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Bureau Veritas' dividend made up quite a large proportion of earnings but only 49% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 28.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 59% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was €0.458 in 2013, and the most recent fiscal year payment was €0.77. This means that it has been growing its distributions at 5.3% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Bureau Veritas might have put its house in order since then, but we remain cautious.

We Could See Bureau Veritas' Dividend Growing

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. Bureau Veritas has impressed us by growing EPS at 7.3% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On Bureau Veritas' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Bureau Veritas that investors should know about before committing capital to this stock. Is Bureau Veritas not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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