Vicat's (EPA:VCT) Shareholders Will Receive A Bigger Dividend Than Last Year

Vicat S.A. (EPA:VCT) has announced that it will be increasing its dividend on the 3rd of May to €1.65. This takes the dividend yield from 5.5% to 5.5%, which shareholders will be pleased with.

View our latest analysis for Vicat

Vicat's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Vicat was paying only paying out a fraction of earnings, but the payment was a massive 139% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share is forecast to fall by 1.4% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 36%, which is comfortable for the company to continue in the future.

Vicat Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from €1.50 to €1.65. Its dividends have grown at less than 1% per annum over this time frame. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Vicat Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Vicat has been growing its earnings per share at 8.3% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Vicat's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Vicat's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 3 warning signs for Vicat that investors should know about before committing capital to this stock. 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.