Epwin Group (LON:EPWN) Will Pay A Larger Dividend Than Last Year At £0.028

Epwin Group Plc (LON:EPWN) will increase its dividend on the 5th of June to £0.028, which is 9.8% higher than last year's payment from the same period of £0.0255. This takes the dividend yield to 5.5%, which shareholders will be pleased with.

See our latest analysis for Epwin Group

Epwin Group's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 75% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Unless the company can turn things around, EPS could fall by 2.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 73%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.0282 in 2014, and the most recent fiscal year payment was £0.048. This means that it has been growing its distributions at 5.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Epwin Group May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that Epwin Group's earnings per share has fallen at approximately 2.9% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Epwin Group's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Epwin Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Epwin Group that investors need to be conscious of moving forward. Is Epwin Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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