Stock Analysis

Weir Group's (LON:WEIR) Upcoming Dividend Will Be Larger Than Last Year's

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LSE:WEIR
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The board of The Weir Group PLC (LON:WEIR) has announced that it will be paying its dividend of £0.135 on the 4th of November, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 1.9% is only a modest boost to shareholder returns.

See our latest analysis for Weir Group

Weir Group's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Weir Group was paying only paying out a fraction of earnings, but the payment was a massive 144% of 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.

The next year is set to see EPS grow by 53.1%. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

historic-dividend
LSE:WEIR Historic Dividend September 28th 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from £0.33 total annually to £0.27. Doing the maths, this is a decline of about 2.0% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Weir Group has impressed us by growing EPS at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Weir Group's prospects of growing its dividend payments in the future.

Our Thoughts On Weir Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Weir Group is earning enough to cover the payments, the cash flows are lacking. We don't think Weir Group 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Weir Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

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About LSE:WEIR

Weir Group

The Weir Group PLC produces and sells highly engineered original equipment worldwide.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation1
Future Growth3
Past Performance5
Financial Health4
Dividends1

Read more about these checks in the individual report sections or in our analysis model.

Solid track record with adequate balance sheet.