Stock Analysis

Kitwave Group (LON:KITW) Is Increasing Its Dividend To £0.0675

AIM:KITW
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Kitwave Group plc (LON:KITW) will increase its dividend from last year's comparable payment on the 28th of April to £0.0675. Even though the dividend went up, the yield is still quite low at only 3.3%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Kitwave Group's stock price has increased by 50% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Kitwave Group

Kitwave Group Doesn't Earn Enough To Cover Its Payments

If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite easily covered by Kitwave Group's earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 60.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 115%, which could put the dividend in jeopardy if the company's earnings don't improve.

historic-dividend
AIM:KITW Historic Dividend April 5th 2023

Kitwave Group's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The dividend has gone from an annual total of £0.045 in 2021 to the most recent total annual payment of £0.0925. This works out to be a compound annual growth rate (CAGR) of approximately 43% a year over that time. Kitwave Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Potential Is Shaky

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. Over the past five years, it looks as though Kitwave Group's EPS has declined at around 61% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Kitwave Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Kitwave Group that investors should take into consideration. Is Kitwave 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.