Wynnstay Group's (LON:WYN) Upcoming Dividend Will Be Larger Than Last Year's

The board of Wynnstay Group Plc (LON:WYN) has announced that it will be increasing its dividend by 8.7% on the 29th of October to UK£0.05. This makes the dividend yield 2.6%, which is above the industry average.

Check out our latest analysis for Wynnstay Group

Wynnstay Group's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Wynnstay Group's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 16.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.

Wynnstay Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the first annual payment was UK£0.071, compared to the most recent full-year payment of UK£0.15. This works out to be a compound annual growth rate (CAGR) of approximately 7.8% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately, Wynnstay Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Wynnstay Group is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

We Really Like Wynnstay Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in Wynnstay Group in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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