Springfield Properties (LON:SPR) Will Pay A Larger Dividend Than Last Year At £0.047

Springfield Properties Plc's (LON:SPR) periodic dividend will be increasing on the 16th of December to £0.047, with investors receiving 5.6% more than last year's £0.0445. Despite this raise, the dividend yield of 5.7% is only a modest boost to shareholder returns.

See our latest analysis for Springfield Properties

Springfield Properties' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Springfield Properties' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 71.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Springfield Properties' Dividend Has Lacked Consistency

Springfield Properties has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 5 years was £0.02 in 2017, and the most recent fiscal year payment was £0.062. This implies that the company grew its distributions at a yearly rate of about 25% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Springfield Properties has seen EPS rising for the last five years, at 8.1% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

An additional note is that the company has been raising capital by issuing stock equal to 16% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

We Really Like Springfield Properties' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Springfield Properties that investors need to be conscious of moving forward. Is Springfield Properties not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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