Koninklijke Ahold Delhaize (AMS:AD) Has Announced That It Will Be Increasing Its Dividend To €0.52

Koninklijke Ahold Delhaize N.V. (AMS:AD) will increase its dividend on the 28th of April to €0.52. This takes the dividend yield from 3.5% to 3.5%, which shareholders will be pleased with.

Check out our latest analysis for Koninklijke Ahold Delhaize

Koninklijke Ahold Delhaize'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 payment, Koninklijke Ahold Delhaize was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 3.2%. If the dividend continues along recent trends, we estimate the payout ratio could be 48%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was €0.33 in 2012, and the most recent fiscal year payment was €0.95. This means that it has been growing its distributions at 11% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see Koninklijke Ahold Delhaize has been growing its earnings per share at 22% a year over the past five years. Koninklijke Ahold Delhaize is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Koninklijke Ahold Delhaize's Dividend

Overall, a dividend increase is always good, and we think that Koninklijke Ahold Delhaize is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 instance, we've picked out 1 warning sign for Koninklijke Ahold Delhaize that investors should take into consideration. 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.