In This Article:
Castings P.L.C. (LON:CGS) has announced that it will pay a dividend of £0.0421 per share on the 2nd of January. This takes the dividend yield to 9.5%, which shareholders will be pleased with.
See our latest analysis for Castings
Castings' Projections Indicate Future Payments May Be Unsustainable
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Castings was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Looking forward, earnings per share is forecast to fall by 11.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 106%, which could put the dividend under pressure if earnings don't start to improve.
Castings Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of £0.13 in 2014 to the most recent total annual payment of £0.253. This means that it has been growing its distributions at 6.9% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Castings May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Unfortunately, Castings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Our Thoughts On Castings' Dividend
In summary, while it's always good to see the dividend being raised, we don't think Castings' payments are rock solid. While Castings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Castings (1 is significant!) that you should be aware of before investing. Is Castings 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.