Sanderson Design Group (LON:SDG) Is Due To Pay A Dividend Of £0.0275

Sanderson Design Group plc's (LON:SDG) investors are due to receive a payment of £0.0275 per share on 9th of August. This means the annual payment will be 3.4% of the current stock price, which is lower than the industry average.

View our latest analysis for Sanderson Design Group

Sanderson Design Group's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Sanderson Design Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 12.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 36%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of £0.0185 in 2014 to the most recent total annual payment of £0.035. This works out to be a compound annual growth rate (CAGR) of approximately 6.6% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Sanderson Design Group might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Sanderson Design Group has impressed us by growing EPS at 13% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Sanderson Design Group Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Sanderson Design Group might even raise payments in the future. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Sanderson Design Group that investors should take into consideration. Is Sanderson Design Group 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.

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