Renew Holdings (LON:RNWH) Is Increasing Its Dividend To £0.12

The board of Renew Holdings plc (LON:RNWH) has announced that it will be paying its dividend of £0.12 on the 8th of March, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average.

Check out our latest analysis for Renew Holdings

Renew Holdings' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Renew Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 1.1%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 35%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was £0.0315 in 2013, and the most recent fiscal year payment was £0.18. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Renew Holdings has been growing its earnings per share at 34% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Renew Holdings 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. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Renew Holdings that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.