Bunzl (LON:BNZL) Is Increasing Its Dividend To £0.182

The board of Bunzl plc (LON:BNZL) has announced that the dividend on 3rd of January will be increased to £0.182, which will be 5.2% higher than last year's payment of £0.173 which covered the same period. This makes the dividend yield about the same as the industry average at 2.2%.

View our latest analysis for Bunzl

Bunzl's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite easily covered by Bunzl's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 13.7%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from £0.282 total annually to £0.627. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

We Could See Bunzl's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Bunzl has grown earnings per share at 8.0% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Bunzl's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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 17 Bunzl analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Bunzl not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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