Warpaint London (LON:W7L) Is Increasing Its Dividend To £0.026

September 24, 2022
  •  Updated
October 11, 2022
Source: Shutterstock

Warpaint London PLC (LON:W7L) has announced that it will be increasing its periodic dividend on the 25th of November to £0.026, which will be 4.0% higher than last year's comparable payment amount of £0.025. This makes the dividend yield 4.6%, which is above the industry average.

Check out our latest analysis for Warpaint London

Warpaint London's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. At the time of the last dividend payment, Warpaint London was paying out a very large proportion of what it was earning and 451% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS could expand by 6.9% if the company continues along the path it has been on recently. If recent patterns in the dividend continue, the payout ratio in 12 months could be 91% which is a bit high but can definitely be sustainable.

AIM:W7L Historic Dividend September 24th 2022

Warpaint London's Dividend Has Lacked Consistency

Looking back, Warpaint London's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2017, the annual payment back then was £0.015, compared to the most recent full-year payment of £0.06. This means that it has been growing its distributions at 32% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Warpaint London has been growing its earnings per share at 6.9% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Warpaint London you should be aware of, and 1 of them is a bit unpleasant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Warpaint London is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis