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Galliford Try Holdings plc (LON:GFRD) will increase its dividend from last year's comparable payment on the 5th of December to £0.115. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.
View our latest analysis for Galliford Try Holdings
Galliford Try Holdings' Future Dividend Projections Appear Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite easily covered by Galliford Try Holdings' 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 fall by 16.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 42%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £0.53 in 2014, and the most recent fiscal year payment was £0.105. Dividend payments have fallen sharply, down 80% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Galliford Try Holdings has impressed us by growing EPS at 70% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Galliford Try Holdings could prove to be a strong dividend payer.
Galliford Try Holdings Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Galliford Try Holdings that investors should take into consideration. Is Galliford Try Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.