RWS Holdings' (LON:RWS) Upcoming Dividend Will Be Larger Than Last Year's

The board of RWS Holdings plc (LON:RWS) has announced that it will be increasing its dividend by 6.7% on the 21st of July to £0.024, up from last year's comparable payment of £0.0225. This takes the dividend yield to 4.6%, which shareholders will be pleased with.

Check out our latest analysis for RWS Holdings

RWS Holdings' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, RWS Holdings was paying out 77% of earnings, but a comparatively small 53% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 41.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 61%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

RWS Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of £0.035 in 2013 to the most recent total annual payment of £0.118. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

RWS Holdings Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that RWS Holdings has been growing its earnings per share at 7.7% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think RWS Holdings' payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for RWS Holdings for free with public 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.