Investors In Royal Boskalis Westminster N.V. (AMS:BOKA) Should Consider This, First

Dividend paying stocks like Royal Boskalis Westminster N.V. (AMS:BOKA) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. Yet sometimes, investors buy a popular dividend stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.

A 1.9% yield is nothing to get excited about, but investors probably think the long payment history suggests Royal Boskalis Westminster has some staying power. The company also bought back stock during the year, equivalent to approximately 1.5% of the company's market capitalisation at the time. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.

Explore this interactive chart for our latest analysis on Royal Boskalis Westminster!

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Although Royal Boskalis Westminster pays a dividend, it was loss-making during the past year. When a company recently reported a loss, we should investigate if its cash flows covered the dividend.

While the above analysis focuses on dividends relative to a company's earnings, we do note Royal Boskalis Westminster's strong net cash position, which will let it pay larger dividends for a time, should it choose.

Consider getting our latest analysis on Royal Boskalis Westminster's financial position here.

Dividend Volatility

One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. For the purpose of this article, we only scrutinise the last decade of Royal Boskalis Westminster's dividend payments. Its dividend payments have declined on at least one occasion over the past 10 years. During the past 10-year period, the first annual payment was €1.2 in 2011, compared to €0.5 last year. This works out to be a decline of approximately 8.3% per year over that time. Royal Boskalis Westminster's dividend has been cut sharply at least once, so it hasn't fallen by 8.3% every year, but this is a decent approximation of the long term change.

We struggle to make a case for buying Royal Boskalis Westminster for its dividend, given that payments have shrunk over the past 10 years.

Dividend Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS are growing. Royal Boskalis Westminster's earnings per share have shrunk at 10% a year over the past five years. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and Royal Boskalis Westminster's earnings per share, which support the dividend, have been anything but stable.

Conclusion

To summarise, shareholders should always check that Royal Boskalis Westminster's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. Royal Boskalis Westminster is paying out a dividend despite reporting a loss; clearly a concern. Second, earnings per share have been in decline, and its dividend has been cut at least once in the past. To conclude, we've spotted a couple of potential concerns with Royal Boskalis Westminster that may make it less than ideal candidate for dividend investors.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Royal Boskalis Westminster that investors should know about before committing capital to this stock.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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This article by Simply Wall St is general in nature. 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.
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