B&M European Value Retail (LON:BME) Is Due To Pay A Dividend Of £0.05
B&M European Value Retail S.A. (LON:BME) has announced that it will pay a dividend of £0.05 per share on the 16th of December. This means that the annual payment will be 2.6% of the current stock price, which is in line with the average for the industry.
See our latest analysis for B&M European Value Retail
B&M European Value Retail Is Paying Out More Than It Is Earning
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, B&M European Value Retail's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to fall by 4.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 136%, which could put the dividend under pressure if earnings don't start to improve.
B&M European Value Retail's Dividend Has Lacked Consistency
It's comforting to see that B&M European Value Retail has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the dividend has gone from £0.018 total annually to £0.10. This means that it has been growing its distributions at 24% 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.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. B&M European Value Retail has impressed us by growing EPS at 20% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
We Really Like B&M European Value Retail's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for B&M European Value Retail 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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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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