Barclays' (LON:BARC) Upcoming Dividend Will Be Larger Than Last Year's

Barclays PLC (LON:BARC) has announced that it will be increasing its periodic dividend on the 15th of September to £0.027, which will be 20% higher than last year's comparable payment amount of £0.0225. This makes the dividend yield about the same as the industry average at 4.7%.

View our latest analysis for Barclays

Barclays' Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Barclays has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, Barclays' payout ratio sits at 22%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 3.9%. Analysts estimate the future payout ratio will be 32% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was £0.065 in 2013, and the most recent fiscal year payment was £0.0725. This means that it has been growing its distributions at 1.1% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Barclays has impressed us by growing EPS at 156% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Barclays Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. To that end, Barclays has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.