Yahoo Finance Grainger's (LON:GRI) Dividend Will Be Increased To £0.0389
Grainger plc's (LON:GRI) dividend will be increasing from last year's payment of the same period to £0.0389 on 14th of February. Although the dividend is now higher, the yield is only 2.5%, which is below the industry average.
Check out our latest analysis for Grainger
Grainger's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. However, Grainger's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
EPS is set to fall by 48.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 39%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of £0.013 in 2012 to the most recent total annual payment of £0.0597. This means that it has been growing its distributions at 16% 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
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Grainger has seen EPS rising for the last five years, at 12% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Grainger's prospects of growing its dividend payments in the future.
Grainger Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Grainger is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 4 warning signs for Grainger (2 are significant!) that you should be aware of before investing. Is Grainger 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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