Goodwin (LON:GDWN) Is Increasing Its Dividend To UK£1.02

Goodwin PLC (LON:GDWN) has announced that it will be increasing its dividend on the 8th of October to UK£1.02. This takes the dividend yield from 3.1% to 3.1%, which shareholders will be pleased with.

See our latest analysis for Goodwin

Goodwin's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last dividend, Goodwin is earning enough to cover the payment, but the it makes up 107% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 6.5% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 67%, which is in the range that makes us comfortable with the sustainability of the dividend.

Goodwin Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was UK£0.28 in 2011, and the most recent fiscal year payment was UK£1.02. This means that it has been growing its distributions at 14% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See Goodwin's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Goodwin has been growing its earnings per share at 6.5% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Goodwin's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Goodwin's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Goodwin that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list 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.
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