James Halstead (LON:JHD) Is Paying Out A Dividend Of £0.055

James Halstead plc (LON:JHD) will pay a dividend of £0.055 on the 16th of December. This means the dividend yield will be fairly typical at 3.8%.

Check out the opportunities and risks within the GB Building industry.

James Halstead's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, James Halstead's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 1,014% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to grow by 3.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 81%, which is on the higher side, but certainly still feasible.

James Halstead 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 £0.0358 in 2012, and the most recent fiscal year payment was £0.0775. This means that it has been growing its distributions at 8.0% 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

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately, James Halstead's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Slow growth and a high payout ratio could mean that James Halstead has maxed out the amount that it has been able to pay to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think James Halstead is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for James Halstead (of which 1 is concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.