Goodwin (LON:GDWN) Has Announced A Dividend Of £1.40

Goodwin PLC (LON:GDWN) will pay a dividend of £1.40 on the 10th of April. Even though the dividend went up, the yield is still quite low at only 1.9%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Goodwin's stock price has increased by 90% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Goodwin's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before this announcement, Goodwin was paying out 86% of earnings, but a comparatively small 50% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS could expand by 24.8% if the company continues along the path it has been on recently. If recent patterns in the dividend continue, the payout ratio in 12 months could be 78% which is a bit high but can definitely be sustainable.

Check out our latest analysis for Goodwin

Goodwin Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was £0.423, compared to the most recent full-year payment of £2.80. This means that it has been growing its distributions at 21% per annum over that time. 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.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Goodwin has grown earnings per share at 25% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Goodwin hasn't been doing.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend is easily covered by cash flows and has a good track record, but we think the payout ratio might be a bit high. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. As an example, we've identified 1 warning sign for Goodwin that you should be aware of before investing. 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.