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JTC PLC's (LON:JTC) periodic dividend will be increasing on the 20th of October to £0.035, with investors receiving 13% more than last year's £0.031. Even though the dividend went up, the yield is still quite low at only 1.3%.
View our latest analysis for JTC
JTC's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, JTC was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 140.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.
JTC Is Still Building Its Track Record
It is great to see that JTC has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2018, the dividend has gone from £0.02 total annually to £0.0998. This works out to be a compound annual growth rate (CAGR) of approximately 38% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that JTC has been growing its earnings per share at 32% a 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 JTC could prove to be a strong dividend payer.
We should note that JTC has issued stock equal to 12% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
JTC Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.