James Latham's (LON:LTHM) Upcoming Dividend Will Be Larger Than Last Year's

The board of James Latham plc (LON:LTHM) has announced that it will be paying its dividend of £0.71 on the 23rd of August, an increased payment from last year's comparable dividend. This makes the dividend yield 5.8%, which is above the industry average.

Check out our latest analysis for James Latham

James Latham's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. But before making this announcement, James Latham's earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 88% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Looking forward, earnings per share is forecast to fall by 9.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 84%, which is definitely on the higher side.

James Latham Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of £0.114 in 2014 to the most recent total annual payment of £0.788. This implies that the company grew its distributions at a yearly rate of about 21% 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

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that James Latham has grown earnings per share at 12% per year over the past five years. James Latham definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. For example, we've identified 2 warning signs for James Latham (1 is significant!) that you should be aware of before investing. Is James Latham not quite the opportunity you were looking for? Why not check out our selection of top 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.

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