In This Article:
Forterra plc's (LON:FORT) periodic dividend will be increasing on the 14th of October to £0.046, with investors receiving 44% more than last year's £0.032. The payment will take the dividend yield to 3.4%, which is in line with the average for the industry.
Check out our latest analysis for Forterra
Forterra's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by Forterra's earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 30.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.
Forterra's Dividend Has Lacked Consistency
Forterra has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of £0.04 in 2016 to the most recent total annual payment of £0.099. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
Forterra May Find It Hard To Grow The Dividend
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. However, Forterra has only grown its earnings per share at 4.3% per annum over the past five years. Growth of 4.3% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.
Our Thoughts On Forterra's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Forterra that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.