Travis Perkins (LON:TPK) Will Pay A Dividend Of £0.055

Travis Perkins plc (LON:TPK) will pay a dividend of £0.055 on the 8th of November. This means that the annual payment is 1.3% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Travis Perkins

Estimates Indicate Travis Perkins' Dividend Coverage Likely To Improve

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Travis Perkins is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 33%, which makes us pretty comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. 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. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

We Could See Travis Perkins' Dividend Growing

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Travis Perkins has impressed us by growing EPS at 5.9% per year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.

In Summary

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. 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. Is Travis Perkins 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.