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

The board of Wilmington plc (LON:WIL) has announced that it will be increasing its dividend by 14% on the 4th of December to £0.083, up from last year's comparable payment of £0.073. This will take the dividend yield to an attractive 2.7%, providing a nice boost to shareholder returns.

See our latest analysis for Wilmington

Wilmington's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Wilmington's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 11.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 52% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.07 in 2014, and the most recent fiscal year payment was £0.103. This implies that the company grew its distributions at a yearly rate of about 3.9% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Wilmington has impressed us by growing EPS at 8.6% per year over the past five years. Wilmington definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Wilmington Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 1 warning sign for Wilmington that you should be aware of before investing. Is Wilmington 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.