Goodwin (LON:GDWN) Is Increasing Its Dividend To £0.665

Goodwin PLC (LON:GDWN) will increase its dividend from last year's comparable payment on the 4th of October to £0.665. This takes the annual payment to 1.8% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Goodwin

Goodwin's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Goodwin's dividend was only 59% 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.

If the trend of the last few years continues, EPS will grow by 7.1% over the next 12 months. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.

Goodwin Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was £0.423 in 2014, and the most recent fiscal year payment was £1.33. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year 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.

We Could See Goodwin's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. Goodwin has impressed us by growing EPS at 7.1% per 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, we always like to see the dividend being raised, but we don't think Goodwin will make a great income stock. While Goodwin is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Goodwin that investors need to be conscious of moving forward. 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.