Videndum's (LON:VID) Dividend Will Be Increased To £0.25

Videndum Plc (LON:VID) has announced that it will be increasing its dividend from last year's comparable payment on the 19th of May to £0.25. This makes the dividend yield about the same as the industry average at 4.6%.

See our latest analysis for Videndum

Videndum's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Videndum's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 11.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was £0.22, compared to the most recent full-year payment of £0.40. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Videndum has grown earnings per share at 25% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Videndum Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Videndum that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.