George Weston Limited (TSE:WN) will increase its dividend on the 1st of July to CA$0.66. This makes the dividend yield 1.6%, which is above the industry average.
George Weston's Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, George Weston's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 15.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.
George Weston Has A Solid Track Record
The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was CA$1.44 in 2012, and the most recent fiscal year payment was CA$2.40. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
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. George Weston has impressed us by growing EPS at 11% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
We Really Like George Weston's Dividend
Overall, a dividend increase is always good, and we think that George Weston is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for George Weston that investors should know about before committing capital to this stock. Is George Weston not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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