Van Lanschot Kempen NV (AMS:VLK) will increase its dividend from last year's comparable payment on the 21st of December to €2.00. This makes the dividend yield 6.1%, which is above the industry average.
Van Lanschot Kempen's Payment Expected To Have Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained.
Having paid out dividends for only 2 years, Van Lanschot Kempen does not have much of a history being a dividend paying company. Diving into the company's earnings report, the payout ratio is set at 88%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.
Over the next 3 years, EPS is forecast to expand by 67.5%. Analysts estimate the future payout ratio could reach 92% over that same time period, which is on the higher side, but certainly still feasible.
Van Lanschot Kempen Is Still Building Its Track Record
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 2 years was €0.70 in 2021, and the most recent fiscal year payment was €1.75. This means that it has been growing its distributions at 58% per annum over that time. Van Lanschot Kempen has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Has Limited Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Van Lanschot Kempen's EPS has declined at around 57% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
The Dividend Could Prove To Be Unreliable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Van Lanschot Kempen that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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