Bureau Veritas' (EPA:BVI) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Bureau Veritas SA (EPA:BVI) has announced that it will be paying its dividend of €0.90 on the 3rd of July, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

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Bureau Veritas' Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before this announcement, Bureau Veritas was paying out 71% of earnings, but a comparatively small 47% of free cash flows. 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.

The next year is set to see EPS grow by 31.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

View our latest analysis for Bureau Veritas

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was €0.48, compared to the most recent full-year payment of €0.90. This means that it has been growing its distributions at 6.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Bureau Veritas Could Grow Its Dividend

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 8.8% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Bureau Veritas Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Bureau Veritas is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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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