BE Semiconductor Industries (AMS:BESI) Is Paying Out Less In Dividends Than Last Year

BE Semiconductor Industries N.V. (AMS:BESI) is reducing its dividend from last year's comparable payment to €2.15 on the 3rd of May. This means that the annual payment will be 1.4% of the current stock price, which is in line with the average for the industry.

See our latest analysis for BE Semiconductor Industries

BE Semiconductor Industries' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend made up a very large portion of earnings and also represented 92% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Looking forward, earnings per share is forecast to rise by 196.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was €0.11 in 2014, and the most recent fiscal year payment was €2.15. This means that it has been growing its distributions at 35% per annum over that time. BE Semiconductor Industries has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, BE Semiconductor Industries has only grown its earnings per share at 4.7% per annum over the past five years. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

Our Thoughts On BE Semiconductor Industries' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for BE Semiconductor Industries (1 can't be ignored!) that you should be aware of before investing. Is BE Semiconductor Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.