J. Smart (Contractors) (LON:SMJ) Is Paying Out A Larger Dividend Than Last Year

The board of J. Smart & Co. (Contractors) PLC (LON:SMJ) has announced that the dividend on 30th of January will be increased to £0.0229, which will be 0.9% higher than last year's payment of £0.0227 which covered the same period. Despite this raise, the dividend yield of 2.4% is only a modest boost to shareholder returns.

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J. Smart (Contractors)'s Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, J. Smart (Contractors)'s dividend was only 25% of earnings, however it was paying out 108% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share could rise by 9.2% 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 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for J. Smart (Contractors)

J. Smart (Contractors) Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was £0.0302, compared to the most recent full-year payment of £0.0323. Its dividends have grown at less than 1% per annum over this time frame. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. J. Smart (Contractors) has impressed us by growing EPS at 9.2% per year over the past five years. J. Smart (Contractors) definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think J. Smart (Contractors) will make a great income stock. While J. Smart (Contractors) is earning enough to cover the payments, the cash flows are lacking. We don't think J. Smart (Contractors) is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for J. Smart (Contractors) (1 can't be ignored!) that you should be aware of before investing. Is J. Smart (Contractors) not quite the opportunity you were looking for? Why not check out our selection of top 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.