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Watkin Jones Plc (LON:WJG) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Watkin Jones' shares before the 8th of June in order to receive the dividend, which the company will pay on the 30th of June.
The company'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£0.059 to shareholders. Based on the last year's worth of payments, Watkin Jones stock has a trailing yield of around 8.6% on the current share price of £0.683. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Watkin Jones
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. Watkin Jones paid out 58% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 63% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Watkin Jones'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 the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Watkin Jones's earnings per share have dropped 6.0% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.