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Bechtle AG (ETR:BC8) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of May to €0.65. Even though the dividend went up, the yield is still quite low at only 1.5%.
View our latest analysis for Bechtle
Bechtle's Payment Has Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Bechtle's dividend was only 33% of earnings, however it was paying out 234% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
The next year is set to see EPS grow by 24.6%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.
Bechtle Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was €0.167 in 2013, and the most recent fiscal year payment was €0.65. This means that it has been growing its distributions at 15% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Bechtle has grown earnings per share at 17% per year over the past five years. Bechtle definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Bechtle's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Bechtle 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 13 Bechtle analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.