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Bunzl's (LON:BNZL) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Bunzl plc (LON:BNZL) has announced that it will be paying its dividend of £0.501 on the 2nd of July, an increased payment from last year's comparable dividend. This takes the annual payment to 2.3% of the current stock price, which is about average for the industry.

Check out our latest analysis for Bunzl

Bunzl's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Bunzl was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

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Over the next year, EPS is forecast to expand by 7.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was £0.294, compared to the most recent full-year payment of £0.683. This implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Bunzl Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Bunzl has seen EPS rising for the last five years, at 9.7% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Bunzl's Dividend

Overall, a dividend increase is always good, and we think that Bunzl 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 2 warning signs for Bunzl that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.