The board of Wynnstay Group Plc (LON:WYN) has announced that it will pay a dividend of £0.056 per share on the 31st of October. This takes the dividend yield to 5.0%, which shareholders will be pleased with.
See our latest analysis for Wynnstay Group
Wynnstay Group's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Wynnstay Group's earnings. This means that a large portion of its earnings are being retained to grow the business.
EPS is set to fall by 6.5% over the next 12 months if recent trends continue. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 77%, meaning that most of the company's earnings is being paid out to shareholders.
Wynnstay Group Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was £0.093, compared to the most recent full-year payment of £0.174. This works out to be a compound annual growth rate (CAGR) of approximately 6.4% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Dividend Growth Is Doubtful
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. In the last five years, Wynnstay Group's earnings per share has shrunk at approximately 6.5% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Wynnstay Group 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.