Stock Analysis

Robert Walters' (LON:RWA) Upcoming Dividend Will Be Larger Than Last Year's

LSE:RWA
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The board of Robert Walters plc (LON:RWA) has announced that it will be increasing its dividend by 20% on the 30th of September to £0.065, up from last year's comparable payment of £0.054. This makes the dividend yield 3.8%, which is above the industry average.

See our latest analysis for Robert Walters

Robert Walters' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last dividend, Robert Walters is earning enough to cover the payment, but then it makes up 98% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to rise by 25.2% over the next year. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

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LSE:RWA Historic Dividend July 31st 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 annual payment back then was £0.0515, compared to the most recent full-year payment of £0.204. This means that it has been growing its distributions at 15% per annum over that time. Robert Walters has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Robert Walters has seen EPS rising for the last five years, at 9.0% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Robert Walters will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Robert Walters is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Robert Walters has 3 warning signs (and 1 which is concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.