Wynnstay Group's (LON:WYN) Dividend Will Be Increased To £0.054

Wynnstay Group Plc (LON:WYN) has announced that it will be increasing its periodic dividend on the 31st of October to £0.054, which will be 8.0% higher than last year's comparable payment amount of £0.05. This takes the dividend yield to 2.7%, which shareholders will be pleased with.

View our latest analysis for Wynnstay Group

Wynnstay Group's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, based ont he last payment, Wynnstay Group was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Over the next year, EPS is forecast to fall by 22.1%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 40%, which is comfortable for the company to continue in the future.

Wynnstay Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was £0.078 in 2012, and the most recent fiscal year payment was £0.159. This implies that the company grew its distributions at a yearly rate of about 7.4% over that duration. 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. Wynnstay Group has impressed us by growing EPS at 12% per 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 should note that Wynnstay Group has issued stock equal to 11% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On Wynnstay Group's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Wynnstay Group has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Wynnstay Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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