Koninklijke Vopak (AMS:VPK) Is Increasing Its Dividend To €1.25

Koninklijke Vopak N.V.'s (AMS:VPK) dividend will be increasing to €1.25 on 28th of April. Based on the announced payment, the dividend yield for the company will be 3.9%, which is fairly typical for the industry.

Check out our latest analysis for Koninklijke Vopak

Koninklijke Vopak's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. At the time of the last dividend payment, Koninklijke Vopak was paying out a very large proportion of what it was earning and 96% 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.

The next year is set to see EPS grow by 149.4%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

Koninklijke Vopak Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was €0.70 in 2012, and the most recent fiscal year payment was €1.25. This means that it has been growing its distributions at 6.0% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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. Koninklijke Vopak's EPS has fallen by approximately 16% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. 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.

Our Thoughts On Koninklijke Vopak's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Koninklijke Vopak is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Koninklijke Vopak that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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