Yahoo Finance Headlam Group (LON:HEAD) Has Announced That It Will Be Increasing Its Dividend To £0.062
Headlam Group plc (LON:HEAD) will increase its dividend from last year's comparable payment on the 28th of November to £0.062. The payment will take the dividend yield to 5.7%, which is in line with the average for the industry.
View our latest analysis for Headlam Group
Headlam Group's Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Headlam Group's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
EPS is set to fall by 3.2% over the next 12 months if recent trends continue. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 84%, meaning that most of the company's earnings is being paid out to shareholders.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of £0.142 in 2012 to the most recent total annual payment of £0.148. Dividend payments have been growing, but very slowly over the period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Headlam Group May Find It Hard To Grow The Dividend
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. It's not great to see that Headlam Group's earnings per share has fallen at approximately 3.2% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
Headlam Group's Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Headlam Group's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Headlam Group you should be aware of, and 1 of them is a bit concerning. 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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