J. Smart (Contractors) (LON:SMJ) Is Due To Pay A Dividend Of £0.0227

J. Smart & Co. (Contractors) PLC's (LON:SMJ) investors are due to receive a payment of £0.0227 per share on 29th of January. This payment means the dividend yield will be 2.6%, which is below the average for the industry.

View our latest analysis for J. Smart (Contractors)

J. Smart (Contractors) Doesn't Earn Enough To Cover Its Payments

Even a low dividend yield can be attractive if it is sustained for years on end. Before this announcement, J. Smart (Contractors) was paying out 655% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.

EPS is set to fall by 46.9% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 1,217%, which could put the dividend under pressure if earnings don't start to improve.

J. Smart (Contractors) 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 £0.029 in 2013, and the most recent fiscal year payment was £0.0323. This works out to be a compound annual growth rate (CAGR) of approximately 1.1% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 47% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

J. Smart (Contractors)'s Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think J. Smart (Contractors) 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. Case in point: We've spotted 5 warning signs for J. Smart (Contractors) (of which 2 are concerning!) you should know about. 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.