Wentworth Resources' (LON:WEN) Upcoming Dividend Will Be Larger Than Last Year's

The board of Wentworth Resources plc (LON:WEN) has announced that the dividend on 29th of July will be increased to UK£0.012, which will be 16% higher than last year. This will take the dividend yield from 6.5% to 6.5%, providing a nice boost to shareholder returns.

Check out our latest analysis for Wentworth Resources

Wentworth Resources' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Wentworth Resources' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 8.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 62%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Wentworth Resources Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from US$0.01 in 2019 to the most recent annual payment of US$0.02. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. Wentworth Resources has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Wentworth Resources has seen EPS rising for the last five years, at 24% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We Really Like Wentworth Resources' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Wentworth Resources 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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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.