Nichols (LON:NICL) Will Pay A Dividend Of £0.171

Nichols plc's (LON:NICL) investors are due to receive a payment of £0.171 per share on 1st of May. This makes the dividend yield about the same as the industry average at 2.5%.

See our latest analysis for Nichols

Estimates Indicate Nichols' Could Struggle to Maintain Dividend Payments In The Future

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Nichols was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Earnings per share is forecast to rise by 50.2% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 120%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of £0.224 in 2015 to the most recent total annual payment of £0.32. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Nichols has seen earnings per share falling at 7.7% per year over the last five years. 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. 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 can turn into a longer term trend.

Our Thoughts On Nichols' Dividend

Overall, we always like to see the dividend being raised, but we don't think Nichols will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

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 2 warning signs for Nichols that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.