The advice of Goodwin PLC (LON: GDWN) has announced that it will increase its dividend on October 8 to UK £ 1.02. This gives a dividend yield of 3.4%, which is above the industry average.
See our latest review for Goodwin
Goodwin’s dividend is well covered by earnings
While it’s great to have a strong dividend yield, we also need to determine if the payout is sustainable. The last installment was fairly easily covered by profits, but it represented 107% of cash flow. This indicates that the company is focusing more on returning cash flow to shareholders, but it could mean that the dividend is exposed to reductions in the future.
Looking ahead, earnings per share could increase 6.5% over the next year if the trend of recent years continues. If the dividend continues according to recent trends, we estimate that the payout ratio will be 67%, which is within the range that puts us at ease with the sustainability of the dividend.
Goodwin has a solid track record
The company has been paying a dividend for a long time, and it’s fairly stable, which gives us confidence in the future dividend potential. Since 2011, the dividend has increased from UK £ 0.29 to UK £ 1.02. This means that he increased his distributions by 13% per year during this period. So, dividends have grown quite quickly, and what is even more impressive, they haven’t seen any noticeable decline during that time.
We could see Goodwin’s dividend increase
Some investors will be eager to buy a portion of the company’s stock based on its dividend history. It is encouraging to see that Goodwin has increased its earnings per share by 6.5% per year over the past five years. However, the lack of cash flow makes us a little cautious, especially as regards the future of the dividend.
In summary, while it’s always good to see the dividend go up, we don’t think Goodwin’s payouts are strong. While the low payout rate is a redemption feature, this is offset by the minimum amount of money to cover the payouts. We would probably look elsewhere for an income investment.
Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. Still, there are a host of other factors that investors need to consider, aside from dividend payments, when analyzing a business. As an example, we have identified 1 warning sign for Goodwin that you need to know before you invest. Looking for more high yield dividend ideas? Try our organized list of big dividend payers.
If you decide to trade Goodwin, use the cheapest platform * which is ranked # 1 overall by Barron’s, Interactive brokers. Trade stocks, options, futures, currencies, bonds and funds in 135 markets, all from one integrated account. Promoted
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
*Interactive Brokers Ranked Least Expensive Broker By StockBrokers.com Online Annual Review 2020
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.