James Halstead (LON:JHD) Is Due To Pay A Dividend Of £0.025

James Halstead plc (LON:JHD) has announced that it will pay a dividend of £0.025 per share on the 14th of June. The payment will take the dividend yield to 4.0%, which is in line with the average for the industry.

Check out our latest analysis for James Halstead

James Halstead's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before this announcement, James Halstead was paying out 77% of earnings, but a comparatively small 63% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS could expand by 3.5% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 79%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

James Halstead Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from £0.0438 total annually to £0.08. This means that it has been growing its distributions at 6.2% per annum 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.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, James Halstead has only grown its earnings per share at 3.5% per annum over the past five years. James Halstead's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think James Halstead's payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think James Halstead 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. Now, if you want to look closer, it would be worth checking out our free research on James Halstead management tenure, salary, and performance. Is James Halstead not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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