London Security's (LON:LSC) Dividend Will Be Increased To £0.82

London Security plc's (LON:LSC) periodic dividend will be increasing on the 7th of December to £0.82, with investors receiving 95% more than last year's £0.42. Based on this payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.

See our latest analysis for London Security

London Security's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, London Security's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 7.9% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was £0.92, compared to the most recent full-year payment of £0.84. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. A company that decreases its dividend over time generally isn't what we are looking for.

We Could See London Security's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. London Security has seen EPS rising for the last five years, at 7.9% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for London Security that investors should know about before committing capital to this stock. 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.