Yahoo Finance Dunelm Group (LON:DNLM) Will Pay A Larger Dividend Than Last Year At £0.26
The board of Dunelm Group plc (LON:DNLM) has announced that it will be paying its dividend of £0.26 on the 5th of December, an increased payment from last year's comparable dividend. This will take the annual payment to 5.1% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for Dunelm Group
Dunelm Group Doesn't Earn Enough To Cover Its Payments
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Dunelm Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
EPS is set to fall by 9.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 104%, which could put the dividend in jeopardy if the company's earnings don't improve.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from £0.14 total annually to £0.40. This means that it has been growing its distributions at 11% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Dunelm Group has impressed us by growing EPS at 19% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
Dunelm Group Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Dunelm Group is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Dunelm Group (of which 1 makes us a bit uncomfortable!) you should know about. Is Dunelm Group 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.
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