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Chemring Group (LON:CHG) Is Increasing Its Dividend To £0.019

Chemring Group PLC (LON:CHG) has announced that it will be increasing its periodic dividend on the 9th of September to £0.019, which will be 19% higher than last year's comparable payment amount of £0.016. This takes the annual payment to 1.5% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Chemring Group

Chemring Group's Earnings Easily Cover the Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Chemring Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

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The next year is set to see EPS grow by 13.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% 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. The dividend has gone from an annual total of £0.148 in 2012 to the most recent total annual payment of £0.051. Dividend payments have fallen sharply, down 66% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Chemring Group has impressed us by growing EPS at 24% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Chemring Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Chemring Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.

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