B&M European Value Retail's (LON:BME) Dividend Will Be £0.05

The board of B&M European Value Retail S.A. (LON:BME) has announced that it will pay a dividend of £0.05 per share on the 16th of December. This means that the annual payment will be 2.6% of the current stock price, which is in line with the average for the industry.

Check out the opportunities and risks within the XX Multiline Retail industry.

B&M European Value Retail Is Paying Out More Than It Is Earning

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, B&M European Value Retail was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 8.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 142%, which could put the dividend under pressure if earnings don't start to improve.

B&M European Value Retail's Dividend Has Lacked Consistency

It's comforting to see that B&M European Value Retail has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2014, the annual payment back then was £0.018, compared to the most recent full-year payment of £0.10. 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. We are encouraged to see that B&M European Value Retail has grown earnings per share at 20% per year over the past five years. B&M European Value Retail is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like B&M European Value Retail's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for B&M European Value Retail you should be aware of, and 1 of them makes us a bit uncomfortable. Is B&M European Value Retail 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.