Yahoo Finance Titon Holdings (LON:TON) Is Increasing Its Dividend To UK£0.03
Titon Holdings Plc (LON:TON) has announced that it will be increasing its dividend on the 4th of March to UK£0.03. This makes the dividend yield 4.0%, which is above the industry average.
View our latest analysis for Titon Holdings
Titon Holdings' 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, Titon Holdings' dividend was only 49% of earnings, however it was paying out 241% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
Looking forward, EPS could fall by 9.5% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 55%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
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 first annual payment was UK£0.02, compared to the most recent full-year payment of UK£0.045. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Titon Holdings might have put its house in order since then, but we remain cautious.
Dividend Growth Is Doubtful
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. Over the past five years, it looks as though Titon Holdings' EPS has declined at around 9.5% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
The Dividend Could Prove To Be Unreliable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Titon Holdings (1 is potentially serious!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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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.
