Yahoo Finance Balfour Beatty's (LON:BBY) Upcoming Dividend Will Be Larger Than Last Year's
Balfour Beatty plc (LON:BBY) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of December to £0.035. Despite this raise, the dividend yield of 3.1% is only a modest boost to shareholder returns.
View our latest analysis for Balfour Beatty
Balfour Beatty's Earnings Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Balfour Beatty was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 16.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from £0.138 total annually to £0.095. The dividend has shrunk at around 3.7% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Balfour Beatty has grown earnings per share at 56% 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.
Balfour Beatty Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Balfour Beatty you should be aware of, and 1 of them is potentially serious. 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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