Bureau Veritas (EPA:BVI) Will Pay A Larger Dividend Than Last Year At €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. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.

See our latest analysis for Bureau Veritas

Bureau Veritas' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before this announcement, Bureau Veritas was paying out 75% of earnings, but a comparatively small 57% 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.

Looking forward, earnings per share is forecast to rise by 32.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 58%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 2014, the annual payment back then was €0.48, compared to the most recent full-year payment of €0.83. This means that it has been growing its distributions at 5.6% 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.

The Dividend Has Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Bureau Veritas has been growing its earnings per share at 7.8% a 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.

In Summary

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. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Bureau Veritas that investors should take into consideration. 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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