Vicat S.A. (EPA:VCT) will increase its dividend on the 3rd of May to €1.65. This will take the annual payment from 5.4% to 5.4% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Vicat
Vicat's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. 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.
The next year is set to see EPS grow by 4.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.
Vicat Has A Solid Track Record
The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was €1.50 in 2012, and the most recent fiscal year payment was €1.65. Dividend payments have been growing, but very slowly over the period. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend Has Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see Vicat has been growing its earnings per share at 8.3% a 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 the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Vicat is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for Vicat that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated 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.
About ENXTPA:VCT
Vicat
Engages in the production and sale of cement, ready-mixed concrete, and aggregates for construction industry.
Undervalued with solid track record and pays a dividend.
