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M Winkworth PLC (LON:WINK) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 23rd of July in order to receive the dividend, which the company will pay on the 20th of August.
M Winkworth's next dividend payment will be UK£0.014 per share, on the back of last year when the company paid a total of UK£0.084 to shareholders. Based on the last year's worth of payments, M Winkworth stock has a trailing yield of around 6.0% on the current share price of £1.4. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for M Winkworth
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 77% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that M Winkworth's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit M Winkworth paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see M Winkworth's earnings per share have been shrinking at 3.1% a year over the previous five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. M Winkworth has delivered an average of 6.3% per year annual increase in its dividend, based on the past ten years of dividend payments. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. M Winkworth is already paying out 77% of its profits, and with shrinking earnings we think it's unlikely that this dividend will grow quickly in the future.