Howden Joinery Group (LON:HWDN) Is Due To Pay A Dividend Of £0.049

The board of Howden Joinery Group Plc (LON:HWDN) has announced that it will pay a dividend of £0.049 per share on the 22nd of November. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

See our latest analysis for Howden Joinery Group

Howden Joinery Group's Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Howden Joinery Group's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 34.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was £0.055, compared to the most recent full-year payment of £0.211. This means that it has been growing its distributions at 14% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Howden Joinery Group Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Howden Joinery Group has impressed us by growing EPS at 7.1% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for Howden Joinery Group that investors need to be conscious of moving forward. Is Howden Joinery Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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