Porvair plc's (LON:PRV) dividend will be increasing on the 27th of August to UK£0.018, with investors receiving 5.9% more than last year. Even though the dividend went up, the yield is still quite low at only 0.9%.
Porvair's Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Porvair's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 15.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.
Porvair Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from UK£0.023 in 2011 to the most recent annual payment of UK£0.05. This implies that the company grew its distributions at a yearly rate of about 8.1% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Has Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Porvair has grown earnings per share at 6.1% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Porvair Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Porvair in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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