Advertisement
UK markets closed
  • FTSE 100

    7,895.85
    +18.80 (+0.24%)
     
  • FTSE 250

    19,391.30
    -59.37 (-0.31%)
     
  • AIM

    745.67
    +0.38 (+0.05%)
     
  • GBP/EUR

    1.1607
    -0.0076 (-0.65%)
     
  • GBP/USD

    1.2373
    -0.0065 (-0.52%)
     
  • Bitcoin GBP

    52,462.64
    +1,129.23 (+2.20%)
     
  • CMC Crypto 200

    1,389.66
    +77.04 (+5.87%)
     
  • S&P 500

    4,967.23
    -43.89 (-0.88%)
     
  • DOW

    37,986.40
    +211.02 (+0.56%)
     
  • CRUDE OIL

    83.24
    +0.51 (+0.62%)
     
  • GOLD FUTURES

    2,406.70
    +8.70 (+0.36%)
     
  • NIKKEI 225

    37,068.35
    -1,011.35 (-2.66%)
     
  • HANG SENG

    16,224.14
    -161.73 (-0.99%)
     
  • DAX

    17,737.36
    -100.04 (-0.56%)
     
  • CAC 40

    8,022.41
    -0.85 (-0.01%)
     

Rotork (LON:ROR) Is Increasing Its Dividend To £0.043

Rotork plc's (LON:ROR) dividend will be increasing from last year's payment of the same period to £0.043 on 19th of May. The payment will take the dividend yield to 2.1%, which is in line with the average for the industry.

Check out our latest analysis for Rotork

Rotork's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Rotork's dividend was only 62% of earnings, however it was paying out 129% 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.

ADVERTISEMENT

Over the next year, EPS is forecast to expand by 46.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from £0.043 total annually to £0.067. This means that it has been growing its distributions at 4.5% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Rotork has grown earnings per share at 11% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Rotork's payments are rock solid. While the low payout ratio is a 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Rotork that investors should know about before committing capital to this stock. Is Rotork not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here