BE Semiconductor Industries (AMS:BESI) Has Announced That Its Dividend Will Be Reduced To €2.15
BE Semiconductor Industries N.V. (AMS:BESI) is reducing its dividend from last year's comparable payment to €2.15 on the 3rd of May. The dividend yield will be in the average range for the industry at 1.3%.
See our latest analysis for BE Semiconductor Industries
BE Semiconductor Industries' Earnings Easily Cover The Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, BE Semiconductor Industries was paying out 94% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.
According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 36%, which is in a comfortable range for us.
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 €0.11 in 2014, and the most recent fiscal year payment was €2.15. This works out to be a compound annual growth rate (CAGR) of approximately 35% a year 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.
Dividend Growth May Be Hard To Achieve
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. Earnings per share has been crawling upwards at 4.6% per year. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.
Our Thoughts On BE Semiconductor Industries' Dividend
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.
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 17 BE Semiconductor Industries analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is BE Semiconductor Industries not quite the opportunity you were looking for? Why not check out our selection of top 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.
