Wilmington's (LON:WIL) Upcoming Dividend Will Be Larger Than Last Year's

By
Simply Wall St
Published
February 24, 2022
LSE:WIL
Source: Shutterstock

Wilmington plc (LON:WIL) has announced that it will be increasing its dividend on the 6th of April to UK£0.024. This will take the dividend yield to an attractive 2.6%, providing a nice boost to shareholder returns.

View our latest analysis for Wilmington

Wilmington's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Wilmington's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 1.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

historic-dividend
LSE:WIL Historic Dividend February 24th 2022

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 first annual payment during the last 10 years was UK£0.07 in 2012, and the most recent fiscal year payment was UK£0.078. This means that it has been growing its distributions at 1.1% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Wilmington's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

Our Thoughts On Wilmington's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Wilmington that investors should know about before committing capital to this stock. Is Wilmington not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.