Bovis Homes Group PLC (LON:BVS) stock is about to trade ex-dividend in 1 days time. Ex-dividend means that investors that purchase the stock on or after the 24th of December will not receive this dividend, which will be paid on the 29th of May.
Bovis Homes Group's next dividend payment will be UK£0.41 per share, on the back of last year when the company paid a total of UK£0.57 to shareholders. Calculating the last year's worth of payments shows that Bovis Homes Group has a trailing yield of 4.5% on the current share price of £13.73. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Bovis Homes Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bovis Homes Group is paying out an acceptable 54% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 31% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Bovis Homes Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Bovis Homes Group's earnings per share have risen 19% per annum over the last five years. Bovis Homes Group has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past nine years, Bovis Homes Group has increased its dividend at approximately 40% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Should investors buy Bovis Homes Group for the upcoming dividend? We like Bovis Homes Group's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.
Wondering what the future holds for Bovis Homes Group? See what the ten analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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