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IMCD N.V. (AMS:IMCD) will increase its dividend from last year's comparable payment on the 4th of May to €2.37. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.
See our latest analysis for IMCD
IMCD's Payment Has Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite easily covered by IMCD's earnings. This means that a large portion of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 5.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 50% by next year, which is in a pretty sustainable range.
IMCD Doesn't Have A Long Payment History
IMCD's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 8 years was €0.20 in 2015, and the most recent fiscal year payment was €2.37. This means that it has been growing its distributions at 36% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. IMCD has seen EPS rising for the last five years, at 30% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that IMCD could prove to be a strong dividend payer.
IMCD Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that IMCD is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for IMCD that investors should know about before committing capital to this stock. Is IMCD not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.