Goodwin (LON:GDWN) Is Increasing Its Dividend To £0.575

Goodwin PLC's (LON:GDWN) dividend will be increasing from last year's payment of the same period to £0.575 on 12th of April. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

Check out our latest analysis for Goodwin

Goodwin's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Goodwin's dividend was only 56% of earnings, however it was paying out 103% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS could expand by 12.4% if recent trends continue. If the dividend continues on this path, the payout ratio could be 55% by next year, which we think can be pretty sustainable going forward.

Goodwin Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of £0.353 in 2013 to the most recent total annual payment of £1.15. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

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. It's encouraging to see that Goodwin has been growing its earnings per share at 12% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Goodwin is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing 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.