Bunzl's (LON:BNZL) Dividend Will Be Increased To £0.501

Bunzl plc's (LON:BNZL) dividend will be increasing from last year's payment of the same period to £0.501 on 2nd of July. 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

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Bunzl was quite comfortably earning enough to cover the dividend. 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 7.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.294 in 2014, and the most recent fiscal year payment was £0.683. This works out to be a compound annual growth rate (CAGR) of approximately 8.8% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Bunzl Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Bunzl has seen EPS rising for the last five years, at 9.8% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Bunzl Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Bunzl is a strong income stock thanks to its track record and growing earnings. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Bunzl that investors need to be conscious of moving forward. Is Bunzl 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.