Schroders (LON:SDR) Has Announced A Dividend Of £0.065

Schroders plc's (LON:SDR) investors are due to receive a payment of £0.065 per share on 25th of September. Based on this payment, the dividend yield on the company's stock will be 5.7%, which is an attractive boost to shareholder returns.

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Schroders' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Schroders' dividend made up quite a large proportion of earnings but only 31% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 61.7%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 61% which would be quite comfortable going to take the dividend forward.

Check out our latest analysis for Schroders

Schroders Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was £0.112, compared to the most recent full-year payment of £0.215. This implies that the company grew its distributions at a yearly rate of about 6.7% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Schroders' EPS has declined at around 4.3% a year. 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.

Our Thoughts On Schroders' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Schroders is a great stock to add to your portfolio if income is your focus.

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. For example, we've picked out 1 warning sign for Schroders that investors should know about before committing capital to this stock. 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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