Yahoo Finance Renishaw (LON:RSW) Is Paying Out A Larger Dividend Than Last Year
Renishaw plc (LON:RSW) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of December to £0.566. This makes the dividend yield 2.0%, which is above the industry average.
See our latest analysis for Renishaw
Renishaw's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Renishaw's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
The next year is set to see EPS grow by 29.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.385 in 2012, and the most recent fiscal year payment was £0.726. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 3.2% per annum over the last five years, which admittedly is a bit slow. Growth of 3.2% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On Renishaw's Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for Renishaw for free with public analyst estimates for the company. Is Renishaw 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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