Budimex's (WSE:BDX) Shareholders Will Receive A Smaller Dividend Than Last Year

Budimex SA (WSE:BDX) has announced that on 5th of June, it will be paying a dividend ofPLN17.99, which a reduction from last year's comparable dividend. This means that the annual payment will be 5.1% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Budimex

Budimex's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last payment made up 86% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 5.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 85%, which is on the higher side, but certainly still feasible.

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 2013, the annual payment back then was PLN10.97, compared to the most recent full-year payment of PLN17.99. This implies that the company grew its distributions at a yearly rate of about 5.1% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

We Could See Budimex's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Budimex has seen EPS rising for the last five years, at 5.7% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Budimex that investors should know about before committing capital to this stock. Is Budimex 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.