Koninklijke DSM's (AMS:DSM) Upcoming Dividend Will Be Larger Than Last Year's

The board of Koninklijke DSM N.V. (AMS:DSM) has announced that it will be increasing its dividend on the 1st of June to €1.70. Despite this raise, the dividend yield of 1.5% is only a modest boost to shareholder returns.

Check out our latest analysis for Koninklijke DSM

Koninklijke DSM's Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite easily covered by Koninklijke DSM's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 14.3%. If the dividend continues along recent trends, we estimate the payout ratio could be 51%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Koninklijke DSM Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the first annual payment was €1.40, compared to the most recent full-year payment of €2.50. This means that it has been growing its distributions at 6.0% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Koninklijke DSM has impressed us by growing EPS at 11% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Koninklijke DSM Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. 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. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 21 analysts we track are forecasting for Koninklijke DSM for free with public analyst estimates for the company. Is Koninklijke DSM not quite the opportunity you were looking for? Why not check out our selection of top 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.