NWF Group (LON:NWF) Is Increasing Its Dividend To £0.065

NWF Group plc's (LON:NWF) dividend will be increasing from last year's payment of the same period to £0.065 on 9th of December. Even though the dividend went up, the yield is still quite low at only 2.9%.

Our analysis indicates that NWF is potentially overvalued!

NWF Group's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, NWF Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 13.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

NWF Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was £0.045 in 2012, and the most recent fiscal year payment was £0.075. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

We Could See NWF Group's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. NWF Group has impressed us by growing EPS at 8.5% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like NWF Group's Dividend

Overall, a dividend increase is always good, and we think that NWF Group is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for NWF Group that you should be aware of before investing. 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.