Kitwave Group (LON:KITW) Is Paying Out A Larger Dividend Than Last Year

Kitwave Group plc (LON:KITW) will increase its dividend on the 4th of August to £0.0375, which is 50% higher than last year's payment from the same period of £0.025. Although the dividend is now higher, the yield is only 3.0%, which is below the industry average.

See our latest analysis for Kitwave Group

Kitwave Group Is Paying Out More Than It Is Earning

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite easily covered by Kitwave Group's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, EPS could fall by 59.8% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 169%, which could put the dividend in jeopardy if the company's earnings don't improve.

Kitwave Group's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2021, the dividend has gone from £0.045 total annually to £0.0925. This implies that the company grew its distributions at a yearly rate of about 43% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. Earnings per share has been sinking by 60% over the last five years. 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

In summary, while it's always good to see the dividend being raised, we don't think Kitwave Group's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Kitwave Group that investors need to be conscious of moving forward. 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.