Epwin Group's (LON:EPWN) Dividend Will Be Increased To UK£0.024

Epwin Group PLC (LON:EPWN) will increase its dividend on the 6th of June to UK£0.024. This takes the dividend yield to 4.6%, which shareholders will be pleased with.

See our latest analysis for Epwin Group

Epwin Group's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Epwin Group's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 0.08%. If the dividend continues along recent trends, we estimate the payout ratio could be 38%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Epwin Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the first annual payment was UK£0.028, compared to the most recent full-year payment of UK£0.047. This implies that the company grew its distributions at a yearly rate of about 6.6% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Epwin Group might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Come By

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. In the last five years, Epwin Group's earnings per share has shrunk at approximately 9.0% per annum. 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

Overall, we always like to see the dividend being raised, but we don't think Epwin Group will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Epwin Group that investors should know about before committing capital to this stock. 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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