Benefit Systems' (WSE:BFT) Shareholders Will Receive A Bigger Dividend Than Last Year

Benefit Systems S.A.'s (WSE:BFT) dividend will be increasing from last year's payment of the same period to PLN135.00 on 25th of November. This takes the dividend yield to 5.5%, which shareholders will be pleased with.

View our latest analysis for Benefit Systems

Benefit Systems' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Benefit Systems' dividend made up quite a large proportion of earnings but only 55% of free cash flows. 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 22.5% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 83% which is a bit high but can definitely be sustainable.

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. The dividend has gone from an annual total of PLN7.50 in 2014 to the most recent total annual payment of PLN135.00. This works out to be a compound annual growth rate (CAGR) of approximately 34% a year over that time. Benefit Systems 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.

Benefit Systems Might Find It Hard To Grow Its Dividend

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 33% per year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Benefit Systems 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. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Benefit Systems that investors need to be conscious of moving forward. 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.

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