Balfour Beatty (LON:BBY) Will Pay A Dividend Of £0.042

Balfour Beatty plc's (LON:BBY) investors are due to receive a payment of £0.042 per share on 5th of December. This takes the annual payment to 2.0% of the current stock price, which unfortunately is below what the industry is paying.

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Balfour Beatty's Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Balfour Beatty's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 32.6%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Balfour Beatty

Balfour Beatty's Dividend Has Lacked Consistency

Balfour Beatty has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was £0.018 in 2016, and the most recent fiscal year payment was £0.129. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. Balfour Beatty has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Balfour Beatty has seen EPS rising for the last five years, at 20% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Balfour Beatty's prospects of growing its dividend payments in the future.

Balfour Beatty Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 6 Balfour Beatty analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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