Balfour Beatty's (LON:BBY) Upcoming Dividend Will Be Larger Than Last Year's

The board of Balfour Beatty plc (LON:BBY) has announced that it will be paying its dividend of £0.087 on the 2nd of July, an increased payment from last year's comparable dividend. This takes the annual payment to 2.6% of the current stock price, which unfortunately is below what the industry is paying.

Our free stock report includes 1 warning sign investors should be aware of before investing in Balfour Beatty. Read for free now.

Balfour Beatty's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. 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 41.2%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Balfour Beatty

Balfour Beatty's Dividend Has Lacked Consistency

Looking back, Balfour Beatty's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of £0.018 in 2016 to the most recent total annual payment of £0.125. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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 impressed us by growing EPS at 13% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Balfour Beatty's Dividend

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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 1 warning sign for Balfour Beatty that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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