Robert Walters (LON:RWA) Has Affirmed Its Dividend Of £0.17

The board of Robert Walters plc (LON:RWA) has announced that it will pay a dividend of £0.17 per share on the 31st of May. This makes the dividend yield 5.8%, which will augment investor returns quite nicely.

View our latest analysis for Robert Walters

Robert Walters' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 117% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 53%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise by 173.6% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 48% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was £0.0522 in 2014, and the most recent fiscal year payment was £0.235. This means that it has been growing its distributions at 16% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been sinking by 16% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 instance, we've picked out 2 warning signs for Robert Walters that investors should take into consideration. Is Robert Walters not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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