Vicat (EPA:VCT) Is Increasing Its Dividend To €1.65

The board of Vicat SA (EPA:VCT) has announced that it will be increasing its dividend on the 3rd of May to €1.65. This will take the dividend yield from 5.3% to 5.3%, providing a nice boost to shareholder returns.

See our latest analysis for Vicat

Vicat's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Vicat's dividend was only 36% of earnings, however it was paying out 139% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 5.0%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Vicat Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from €1.50 in 2012 to the most recent annual payment of €1.65. Dividend payments have grown at less than 1% a year over this period. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Vicat has grown earnings per share at 8.3% per year over the past five years. Vicat definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Vicat will make a great income stock. While Vicat is earning enough to cover the payments, the cash flows are lacking. We don't think Vicat is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Vicat that investors should take into consideration. Is Vicat not quite the opportunity you were looking for? Why not check out our selection of top 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.