Yahoo Finance Ibstock's (LON:IBST) Dividend Will Be Increased To £0.034
The board of Ibstock plc (LON:IBST) has announced that it will be increasing its dividend by 3.0% on the 15th of September to £0.034, up from last year's comparable payment of £0.033. This takes the dividend yield to 5.9%, which shareholders will be pleased with.
View our latest analysis for Ibstock
Ibstock's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Ibstock's dividend was only 51% of earnings, however it was paying out 675% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
EPS is set to fall by 15.7% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 61%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Ibstock's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the dividend has gone from £0.044 total annually to £0.089. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
Dividend Growth May Be Hard To Achieve
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. Unfortunately, Ibstock's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Ibstock's Dividend Doesn't Look Sustainable
Overall, we always like to see the dividend being raised, but we don't think Ibstock will make a great income stock. While Ibstock is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good 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. Case in point: We've spotted 2 warning signs for Ibstock (of which 1 is a bit unpleasant!) you should know about. Is Ibstock 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.
