The board of Brunel International N.V. (AMS:BRNL) has announced that it will be increasing its dividend on the 15th of June to €0.45. This will take the dividend yield from 4.3% to 4.3%, providing a nice boost to shareholder returns.
Brunel International's Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Brunel International was paying out a very large proportion of what it was earning and 223% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.
Looking forward, earnings per share is forecast to rise by 20.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the first annual payment was €0.40, compared to the most recent full-year payment of €0.45. This works out to be a compound annual growth rate (CAGR) of approximately 1.2% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Brunel International has grown earnings per share at 25% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Brunel International hasn't been doing.
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Brunel International is earning enough to cover the payments, the cash flows are lacking. We don't think Brunel International is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Brunel International that investors should take into consideration. Is Brunel International 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.