JTC (LON:JTC) Has Announced That It Will Be Increasing Its Dividend To £0.0824

JTC PLC (LON:JTC) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of June to £0.0824. Despite this raise, the dividend yield of 1.4% is only a modest boost to shareholder returns.

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JTC's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate JTC's Could Struggle to Maintain Dividend Payments In The Future

JTC's Future Dividends May Potentially Be At Risk

If it is predictable over a long period, even low dividend yields can be attractive. Even though JTC isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS is forecast to grow rapidly. Assuming the dividend continues along recent trends, we could see the payout ratio reach 239%, which is on the unsustainable side.

View our latest analysis for JTC

JTC Is Still Building Its Track Record

JTC's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2018, the annual payment back then was £0.02, compared to the most recent full-year payment of £0.125. This means that it has been growing its distributions at 30% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. It's not great to see that JTC's earnings per share has fallen at approximately 9.7% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

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.

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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 8 analysts are forecasting a turnaround in our free collection of analyst estimates here. 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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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.