Van Lanschot Kempen NV (AMS:VLK) will increase its dividend from last year's comparable payment on the 3rd of June to €2.75. This will take the dividend yield to an attractive 8.7%, providing a nice boost to shareholder returns.

See our latest analysis for Van Lanschot Kempen

Van Lanschot Kempen's Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Van Lanschot Kempen is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. 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.

EPS is set to grow by 33.4% over the next 3 years. Likewise, analysts forecast that the future payout ratio could reach 88% over that same time period. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Van Lanschot Kempen Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the annual payment back then was €0.70, compared to the most recent full-year payment of €4.00. This works out to be a compound annual growth rate (CAGR) of approximately 55% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Van Lanschot Kempen's earnings per share has shrunk at 58% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Van Lanschot Kempen's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on Van Lanschot Kempen management tenure, salary, and performance. Is Van Lanschot Kempen 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.