TClarke (LON:CTO) Will Pay A Larger Dividend Than Last Year At £0.0138

The board of TClarke plc (LON:CTO) has announced that the dividend on 29th of September will be increased to £0.0138, which will be 10.0% higher than last year's payment of £0.0125 which covered the same period. This makes the dividend yield about the same as the industry average at 3.9%.

See our latest analysis for TClarke

TClarke's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, TClarke 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.

Looking forward, earnings per share is forecast to rise by 50.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

TClarke Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from £0.03 total annually to £0.0535. This means that it has been growing its distributions at 6.0% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

TClarke May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that TClarke's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While EPS growth is quite low, TClarke has the option to increase the payout ratio to return more cash to shareholders.

We Really Like TClarke's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for TClarke that investors should know about before committing capital to this stock. 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.