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 dividend yield to an attractive 6.1%, providing a nice boost to shareholder returns.

Check out our latest analysis for Van Lanschot Kempen

Van Lanschot Kempen's Earnings Will Easily Cover The Distributions

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. Taking data from Van Lanschot Kempen's last earnings report, the payout ratio is at a decent 88%, meaning that the company is able to pay out its dividend with some room to spare.

EPS is set to grow by 67.5% over the next 3 years. Analysts estimate the future payout ratio could reach 92% over that same time period, which is on the higher side, but certainly still feasible.

Van Lanschot Kempen Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. 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. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Van Lanschot Kempen's earnings per share has shrunk at 57% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Van Lanschot Kempen's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 3 warning signs for Van Lanschot Kempen that investors should take into consideration. Is Van Lanschot Kempen not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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