Arcadis' (AMS:ARCAD) Shareholders Will Receive A Bigger Dividend Than Last Year

Arcadis NV (AMS:ARCAD) has announced that it will be increasing its dividend on the 19th of May to €0.70. Despite this raise, the dividend yield of 1.8% is only a modest boost to shareholder returns.

View our latest analysis for Arcadis

Arcadis' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Arcadis was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 4.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% 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. Since 2012, the dividend has gone from €0.47 to €0.70. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Arcadis has seen EPS rising for the last five years, at 20% per annum. Arcadis definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Arcadis 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Arcadis management tenure, salary, and performance. Is Arcadis not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.