Van Lanschot Kempen (AMS:VLK) Is Paying Out A Larger Dividend Than Last Year

Van Lanschot Kempen NV's (AMS:VLK) dividend will be increasing from last year's payment of the same period to €2.00 on 21st of December. This will take the annual payment to 6.7% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Van Lanschot Kempen

Van Lanschot Kempen's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Van Lanschot Kempen is just starting to establish itself as being able to pay dividends to shareholders, given its short 2-year history of distributing earnings. Diving into the company's earnings report, the payout ratio is set at 88%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

EPS is set to grow by 67.5% over the next 3 years. Likewise, analysts forecast that the future payout ratio could reach 92% over that same time period. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Van Lanschot Kempen Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the dividend has gone from €0.70 total annually to €1.75. This implies that the company grew its distributions at a yearly rate of about 58% over that duration. 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.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 57% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Van Lanschot Kempen will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

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. Taking the debate a bit further, we've identified 3 warning signs for Van Lanschot Kempen that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.