Yahoo Finance Grafton Group (LON:GFTU) Is Increasing Its Dividend To £0.0925
Grafton Group plc's (LON:GFTU) periodic dividend will be increasing on the 7th of October to £0.0925, with investors receiving 8.8% more than last year's £0.085. This will take the annual payment to 4.3% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Grafton Group
Grafton Group's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, based ont he last payment, Grafton Group was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.
Looking forward, earnings per share is forecast to fall by 8.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 44%, which is comfortable for the company to continue in the future.
Grafton Group Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was £0.0619 in 2012, and the most recent fiscal year payment was £0.305. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Grafton Group has seen EPS rising for the last five years, at 15% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Our Thoughts On Grafton Group's Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Grafton Group you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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