Dewhurst Group (LON:DWHT) Is Increasing Its Dividend To UK£0.045

Dewhurst Group Plc (LON:DWHT) has announced that it will be increasing its dividend on the 16th of August to UK£0.045, which will be 5.9% higher than last year. Despite this raise, the dividend yield of 1.1% is only a modest boost to shareholder returns.

Check out our latest analysis for Dewhurst Group

Dewhurst Group's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Dewhurst Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 11.1% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dewhurst Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the dividend has gone from UK£0.067 to UK£0.14. This works out to be a compound annual growth rate (CAGR) of approximately 7.7% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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. It's encouraging to see Dewhurst Group has been growing its earnings per share at 11% a year over the past five years. Dewhurst Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Dewhurst Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Dewhurst Group that investors need to be conscious of moving forward. Is Dewhurst Group not quite the opportunity you were looking for? Why not check out our selection of top 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.