Dewhurst Group (LON:DWHT) Will Pay A Larger Dividend Than Last Year At £0.1025

Dewhurst Group Plc (LON:DWHT) will increase its dividend on the 22nd of February to £0.1025, which is 5.1% higher than last year's payment from the same period of £0.0975. This takes the annual payment to 1.3% of the current stock price, which unfortunately is below what the industry is paying.

Our analysis indicates that DWHT is potentially undervalued!

Dewhurst Group's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, Dewhurst Group's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 2.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, 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 a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was £0.0702 in 2012, and the most recent fiscal year payment was £0.145. This implies that the company grew its distributions at a yearly rate of about 7.5% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 2.6% a year for the past five years, which isn't massive but still better than seeing them shrink. If Dewhurst Group is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

We Really Like Dewhurst Group's Dividend

Overall, a dividend increase is always good, and we think that Dewhurst Group 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Dewhurst Group that you should be aware of before investing. 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.