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M Winkworth PLC (LON:WINK) has announced that it will pay a dividend of £0.029 per share on the 16th of August. This means the annual payment is 8.1% of the current stock price, which is above the average for the industry.
See our latest analysis for M Winkworth
M Winkworth's Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment made up 72% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
If the trend of the last few years continues, EPS will grow by 11.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.049 in 2013, and the most recent fiscal year payment was £0.116. This works out to be a compound annual growth rate (CAGR) of approximately 9.0% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that M Winkworth has grown earnings per share at 12% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.
M Winkworth Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for M Winkworth that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.