Henry Boot (LON:BOOT) Is Paying Out A Larger Dividend Than Last Year

The board of Henry Boot PLC (LON:BOOT) has announced that the dividend on 31st of May will be increased to £0.044, which will be 10.0% higher than last year's payment of £0.04 which covered the same period. This takes the annual payment to 4.0% of the current stock price, which is about average for the industry.

Check out our latest analysis for Henry Boot

Henry Boot's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Henry Boot was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

EPS is set to fall by 5.5% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 40%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of £0.051 in 2014 to the most recent total annual payment of £0.0733. This means that it has been growing its distributions at 3.7% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Henry Boot has seen earnings per share falling at 7.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Henry Boot's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Henry Boot's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Henry Boot is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Henry Boot that investors should know about before committing capital to this stock. Is Henry Boot 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.