Randstad (AMS:RAND) Is Paying Out A Larger Dividend Than Last Year

The board of Randstad N.V. (AMS:RAND) has announced that it will be increasing its dividend on the 5th of April to €2.19. This makes the dividend yield 6.6%, which is above the industry average.

Check out our latest analysis for Randstad

Randstad's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last dividend, Randstad is earning enough to cover the payment, but the it makes up 117% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to expand by 16.6%. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 81%, which is on the higher side, but certainly still feasible.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from €1.25 in 2012 to the most recent annual payment of €5.00. This means that it has been growing its distributions at 15% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see Randstad has been growing its earnings per share at 5.7% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Randstad's Dividend

Overall, we always like to see the dividend being raised, but we don't think Randstad will make a great income stock. While Randstad is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good 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. As an example, we've identified 1 warning sign for Randstad that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.