Posted on April 22, 2024
Arcadis NV (AMS:ARCAD) will increase its dividend from last year’s comparable payment on the 16th of May to €0.85. Even though the dividend went up, the yield is still quite low at only 1.4%.
View our latest analysis for Arcadis
Arcadis’ Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company’s dividend is whether the current payout levels are feasible. Prior to this announcement, Arcadis’ dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 138.6% over the next year. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.
historic-dividend
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was €0.57 in 2014, and the most recent fiscal year payment was €0.85. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It’s encouraging to see that Arcadis has been growing its earnings per share at 52% a year over the past five years. Arcadis is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Arcadis Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Arcadis is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we’ve picked out 1 warning sign for Arcadis that investors should take into consideration. Is Arcadis not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
