Benefit Systems (WSE:BFT) Is Increasing Its Dividend To PLN135.00

The board of Benefit Systems S.A. (WSE:BFT) has announced that it will be paying its dividend of PLN135.00 on the 25th of November, an increased payment from last year's comparable dividend. This makes the dividend yield 5.2%, which is above the industry average.

Check out our latest analysis for Benefit Systems

Benefit Systems' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment made up 87% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

EPS is set to grow by 31.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 80%, 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 2014, the annual payment back then was PLN7.50, compared to the most recent full-year payment of PLN135.00. This works out to be a compound annual growth rate (CAGR) of approximately 34% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Could Be Constrained

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Benefit Systems has impressed us by growing EPS at 29% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Benefit Systems hasn't been doing.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Benefit Systems that investors should know about before committing capital to this stock. 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.