James Latham (LON:LTHM) Is Increasing Its Dividend To £0.0725

James Latham plc's (LON:LTHM) dividend will be increasing from last year's payment of the same period to £0.0725 on 27th of January. The payment will take the dividend yield to 2.0%, which is in line with the average for the industry.

Check out the opportunities and risks within the GB Trade Distributors industry.

James Latham's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, James Latham was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 29.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 15% by next year, which is in a pretty sustainable range.

James Latham Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was £0.0975 in 2012, and the most recent fiscal year payment was £0.255. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. James Latham has impressed us by growing EPS at 30% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

James Latham Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Now, if you want to look closer, it would be worth checking out our free research on James Latham management tenure, salary, and performance. Is James Latham not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.