BE Semiconductor Industries' (AMS:BESI) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of BE Semiconductor Industries N.V. (AMS:BESI) has announced that it will be paying its dividend of €2.18 on the 2nd of May, an increased payment from last year's comparable dividend. This will take the annual payment to 2.3% of the stock price, which is above what most companies in the industry pay.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. BE Semiconductor Industries' stock price has reduced by 36% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

Our free stock report includes 1 warning sign investors should be aware of before investing in BE Semiconductor Industries. Read for free now.

BE Semiconductor Industries' Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, BE Semiconductor Industries' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 102% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

The next year is set to see EPS grow by 125.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

View our latest analysis for BE Semiconductor Industries

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was €0.165 in 2015, and the most recent fiscal year payment was €2.18. This means that it has been growing its distributions at 29% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

BE Semiconductor Industries' Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that BE Semiconductor Industries has been growing its earnings per share at 15% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. 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. Taking the debate a bit further, we've identified 1 warning sign for BE Semiconductor Industries that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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