Yahoo Finance Bunge (NYSE:BG) Has Announced That It Will Be Increasing Its Dividend To $0.625
Bunge Limited (NYSE:BG) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of September to $0.625. This takes the annual payment to 2.6% of the current stock price, which is about average for the industry.
View our latest analysis for Bunge
Bunge's Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Bunge's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share is forecast to rise by 16.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 17% by next year, which is in a pretty sustainable range.
Bunge Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $1.00 in 2012 to the most recent total annual payment of $2.50. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Bunge has impressed us by growing EPS at 27% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Bunge will make a great income stock. While Bunge is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 5 warning signs for Bunge (of which 2 are a bit concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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