Holland Colours (AMS:HOLCO) Is Increasing Its Dividend To €6.85

Holland Colours N.V. (AMS:HOLCO) has announced that it will be increasing its periodic dividend on the 25th of July to €6.85, which will be 128% higher than last year's comparable payment amount of €3.01. This makes the dividend yield about the same as the industry average at 2.8%.

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Holland Colours' Future Dividends May Potentially Be At Risk

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Holland Colours' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, EPS could fall by 5.6% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 114%, which could put the dividend in jeopardy if the company's earnings don't improve.

View our latest analysis for Holland Colours

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was €2.12, compared to the most recent full-year payment of €3.01. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Holland Colours' EPS has declined at around 5.6% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Holland Colours' Dividend

Overall, we always like to see the dividend being raised, but we don't think Holland Colours will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. However, there are other things to consider for investors when analysing stock performance. To that end, Holland Colours has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.