Bureau Veritas (EPA:BVI) Is Increasing Its Dividend To €0.83

Bureau Veritas SA (EPA:BVI) will increase its dividend from last year's comparable payment on the 4th of July to €0.83. This takes the annual payment to 3.0% of the current stock price, which is about average for the industry.

View our latest analysis for Bureau Veritas

Bureau Veritas' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last payment made up 75% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 33.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 58% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from €0.48 total annually to €0.83. This works out to be a compound annual growth rate (CAGR) of approximately 5.6% a year 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 see if earnings per share is growing. Bureau Veritas has impressed us by growing EPS at 7.8% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

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 dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Bureau Veritas that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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