NWF Group (LON:NWF) Will Pay A Dividend Of UK£0.01

By
Simply Wall St
Published
February 04, 2022
AIM:NWF
Source: Shutterstock

NWF Group plc's (LON:NWF) investors are due to receive a payment of UK£0.01 per share on 3rd of May. This means that the annual payment will be 3.4% of the current stock price, which is in line with the average for the industry.

See our latest analysis for NWF Group

NWF Group's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, NWF Group's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

historic-dividend
AIM:NWF Historic Dividend February 4th 2022

NWF Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the first annual payment was UK£0.045, compared to the most recent full-year payment of UK£0.072. This works out to be a compound annual growth rate (CAGR) of approximately 4.8% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though NWF Group's EPS has declined at around 26% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On NWF Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about NWF Group's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think NWF Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 3 warning signs for NWF Group that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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