RELX (LON:REL) Will Pay A Larger Dividend Than Last Year At £0.389

RELX PLC's (LON:REL) dividend will be increasing from last year's payment of the same period to £0.389 on 7th of June. Based on this payment, the dividend yield for the company will be 2.1%, which is fairly typical for the industry.

See our latest analysis for RELX

RELX's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, RELX's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 39.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.

RELX Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was £0.23 in 2013, and the most recent fiscal year payment was £0.546. This means that it has been growing its distributions at 9.0% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

RELX May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately, RELX's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.1% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

RELX Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for RELX that you should be aware of before investing. Is RELX 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.