Stock Analysis

IMCD's (AMS:IMCD) Dividend Will Be Increased To €2.37

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IMCD N.V. (AMS:IMCD) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of May to €2.37. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.

Check out our latest analysis for IMCD

IMCD's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, IMCD 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.

Looking forward, earnings per share is forecast to rise by 12.5% over the next year. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

ENXTAM:IMCD Historic Dividend March 18th 2023

IMCD Doesn't Have A Long Payment History

IMCD's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2015, the annual payment back then was €0.20, compared to the most recent full-year payment of €2.37. This works out to be a compound annual growth rate (CAGR) of approximately 36% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that IMCD has been growing its earnings per share at 30% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that IMCD could prove to be a strong dividend payer.

We Really Like IMCD's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for IMCD that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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