Read This Before Considering Bureau Veritas SA (EPA:BVI) For Its Upcoming €0.83 Dividend

Readers hoping to buy Bureau Veritas SA (EPA:BVI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Bureau Veritas investors that purchase the stock on or after the 2nd of July will not receive the dividend, which will be paid on the 4th of July.

The company's next dividend payment will be €0.83 per share, and in the last 12 months, the company paid a total of €0.83 per share. Looking at the last 12 months of distributions, Bureau Veritas has a trailing yield of approximately 3.1% on its current stock price of €26.48. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Bureau Veritas can afford its dividend, and if the dividend could grow.

View our latest analysis for Bureau Veritas

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bureau Veritas is paying out an acceptable 75% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Bureau Veritas generated enough free cash flow to afford its dividend. Over the last year it paid out 60% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Bureau Veritas's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Bureau Veritas, with earnings per share up 7.8% on average over the last five years. Decent historical earnings per share growth suggests Bureau Veritas has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bureau Veritas has delivered an average of 5.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Bureau Veritas worth buying for its dividend? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Bureau Veritas's dividend merits.

However if you're still interested in Bureau Veritas as a potential investment, you should definitely consider some of the risks involved with Bureau Veritas. Every company has risks, and we've spotted 2 warning signs for Bureau Veritas you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com