Yahoo Finance Jersey Electricity (LON:JEL) Is Paying Out A Larger Dividend Than Last Year
Jersey Electricity plc's (LON:JEL) dividend will be increasing from last year's payment of the same period to £0.108 on 23rd of March. Based on this payment, the dividend yield for the company will be 4.5%, which is fairly typical for the industry.
See our latest analysis for Jersey Electricity
Jersey Electricity's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. Before this announcement, Jersey Electricity was paying out 85% of earnings, but a comparatively small 71% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
EPS is set to fall by 4.7% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 75%, which is an improvement from where it is currently.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from £0.11 total annually to £0.23. This means that it has been growing its distributions at 7.7% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Jersey Electricity May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, Jersey Electricity's earnings per share has shrunk at approximately 4.7% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.
Our Thoughts On Jersey Electricity's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Jersey Electricity that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated 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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