Devro (LON:DVO) Has Announced That It Will Be Increasing Its Dividend To £0.029

Devro plc (LON:DVO) has announced that it will be increasing its periodic dividend on the 13th of January to £0.029, which will be 3.6% higher than last year's comparable payment amount of £0.028. This takes the dividend yield to 5.0%, which shareholders will be pleased with.

Our analysis indicates that DVO is potentially undervalued!

Devro'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 Devro's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 24.4%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Devro Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of £0.08 in 2012 to the most recent total annual payment of £0.094. This means that it has been growing its distributions at 1.6% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Devro has grown earnings per share at 17% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Devro Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Devro is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Devro that you should be aware of before investing. 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.