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

The board of NWF Group plc (LON:NWF) has announced that the dividend on 8th of December will be increased to £0.068, which will be 4.6% higher than last year's payment of £0.065 which covered the same period. This takes the annual payment to 3.5% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for NWF Group

NWF Group's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, NWF Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 28.1%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 38%, which we are pretty comfortable with and we think is feasible on an earnings basis.

NWF Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from £0.045 total annually to £0.078. This works out to be a compound annual growth rate (CAGR) of approximately 5.7% 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.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that NWF Group has been growing its earnings per share at 13% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for NWF Group that you should be aware of before investing. Is NWF Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.