Here's What We Like About Dewhurst Group's (LON:DWHT) Upcoming Dividend
It looks like Dewhurst Group Plc (LON:DWHT) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Dewhurst Group's shares before the 19th of January to receive the dividend, which will be paid on the 22nd of February.
The company's next dividend payment will be UK£0.10 per share, on the back of last year when the company paid a total of UK£0.15 to shareholders. Calculating the last year's worth of payments shows that Dewhurst Group has a trailing yield of 1.3% on the current share price of £11.8. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Dewhurst Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Dewhurst Group paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 46% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Dewhurst Group paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Dewhurst Group, with earnings per share up 2.6% on average over the last five years. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Dewhurst Group has delivered 7.7% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
From a dividend perspective, should investors buy or avoid Dewhurst Group? Earnings per share have been growing moderately, and Dewhurst Group is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Dewhurst Group is halfway there. There's a lot to like about Dewhurst Group, and we would prioritise taking a closer look at it.
While it's tempting to invest in Dewhurst Group for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Dewhurst Group you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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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