Balfour Beatty (LON:BBY) Will Pay A Larger Dividend Than Last Year At £0.08

The board of Balfour Beatty plc (LON:BBY) has announced that it will be paying its dividend of £0.08 on the 3rd of July, an increased payment from last year's comparable dividend. This takes the annual payment to 3.0% of the current stock price, which is about average for the industry.

See our latest analysis for Balfour Beatty

Balfour Beatty's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Balfour Beatty's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 21.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was £0.141 in 2014, and the most recent fiscal year payment was £0.115. Doing the maths, this is a decline of about 2.0% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Balfour Beatty has seen EPS rising for the last five years, at 14% 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

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Balfour Beatty that investors should take into consideration. Is Balfour Beatty 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.