Yahoo Finance Schroders (LON:SDR) Has Announced That It Will Be Increasing Its Dividend To UK£0.37
Schroders plc (LON:SDR) will increase its dividend on the 23rd of September to UK£0.37. This takes the dividend yield from 3.2% to 3.2%, which shareholders will be pleased with.
View our latest analysis for Schroders
Schroders' Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Schroders' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
The next year is set to see EPS grow by 4.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 58% by next year, which is in a pretty sustainable range.
Schroders Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was UK£0.37 in 2011, and the most recent fiscal year payment was UK£1.16. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
Schroders May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, Schroders has only grown its earnings per share at 4.0% per annum over the past five years. Growth of 4.0% 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.
We Really Like Schroders' Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Schroders that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.