Bunzl (LON:BNZL) Will Pay A Dividend Of £0.201

The board of Bunzl plc (LON:BNZL) has announced that it will pay a dividend on the 3rd of January, with investors receiving £0.201 per share. The payment will take the dividend yield to 1.9%, which is in line with the average for the industry.

View our latest analysis for Bunzl

Bunzl's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Bunzl's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 27.6%. 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

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from £0.324 total annually to £0.702. This means that it has been growing its distributions at 8.0% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Bunzl might have put its house in order since then, but we remain cautious.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Bunzl has seen EPS rising for the last five years, at 7.8% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

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 payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Bunzl that investors should take into consideration. Is Bunzl not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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