Travis Perkins (LON:TPK) Is Due To Pay A Dividend Of £0.055

Travis Perkins plc's (LON:TPK) investors are due to receive a payment of £0.055 per share on 8th of November. This means that the dividend yield is 1.2%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Travis Perkins

Travis Perkins' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Travis Perkins is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 43%, which makes us pretty 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 £0.347, compared to the most recent full-year payment of £0.11. The dividend has fallen 68% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Travis Perkins has impressed us by growing EPS at 5.9% per year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.

Our Thoughts On Travis Perkins' Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 16 Travis Perkins analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.