Crest Nicholson Holdings' (LON:CRST) Dividend Will Be Increased To £0.115

Crest Nicholson Holdings plc's (LON:CRST) dividend will be increasing from last year's payment of the same period to £0.115 on 5th of April. This takes the annual payment to 7.0% of the current stock price, which is about average for the industry.

Check out our latest analysis for Crest Nicholson Holdings

Crest Nicholson Holdings' Earnings Easily Cover The Distributions

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, the dividend made up 84% of cash flows, but a higher proportion of net income. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Looking forward, earnings per share is forecast to rise by 112.5% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 63% which would be quite comfortable going to take the dividend forward.

Crest Nicholson Holdings' Dividend Has Lacked Consistency

Crest Nicholson Holdings has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 9 years was £0.065 in 2014, and the most recent fiscal year payment was £0.17. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. 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.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 31% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Crest Nicholson Holdings' Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Crest Nicholson Holdings' payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Crest Nicholson Holdings that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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