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Goodwin PLC (LON:GDWN) will increase its dividend from last year's comparable payment on the 12th of April to £0.575. This makes the dividend yield about the same as the industry average at 2.3%.
Check out our latest analysis for Goodwin
Goodwin's Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last payment was quite easily covered by earnings, but it made up 103% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Looking forward, earnings per share could rise by 12.4% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.
Goodwin Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was £0.353, compared to the most recent full-year payment of £1.15. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Goodwin has been growing its earnings per share at 12% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
Our Thoughts On Goodwin's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Goodwin's payments are rock solid. While Goodwin is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Goodwin that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.