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Judges Scientific plc (LON:JDG) has announced that it will be increasing its dividend from last year's comparable payment on the 11th of July to £0.748. Although the dividend is now higher, the yield is only 1.4%, which is below the industry average.
Judges Scientific's Future Dividend Projections Appear Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Judges Scientific was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 121.1%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.
See our latest analysis for Judges Scientific
Judges Scientific Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was £0.20, compared to the most recent full-year payment of £1.05. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Judges Scientific's EPS has declined at around 3.1% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
Our Thoughts On Judges Scientific's Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Judges Scientific that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.