Bunge (NYSE:BG) Has Announced That It Will Be Increasing Its Dividend To $0.6625

The board of Bunge Limited (NYSE:BG) has announced that it will be paying its dividend of $0.6625 on the 1st of September, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.

Check out our latest analysis for Bunge

Bunge's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Bunge's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 21.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

Bunge Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.08 in 2013 to the most recent total annual payment of $2.65. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Bunge has impressed us by growing EPS at 93% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Bunge will make a great income stock. While Bunge is earning enough to cover the payments, the cash flows are lacking. We don't think Bunge is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Bunge you should be aware of, and 1 of them is a bit concerning. 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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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.