Robinson (LON:RBN) Is Increasing Its Dividend To £0.035

Robinson plc (LON:RBN) has announced that it will be increasing its periodic dividend on the 20th of June to £0.035, which will be 17% higher than last year's comparable payment amount of £0.03. This makes the dividend yield 4.4%, which is above the industry average.

We've discovered 2 warning signs about Robinson. View them for free.

Estimates Indicate Robinson's Dividend Coverage Likely To Improve

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Robinson isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 4.2%, which makes us pretty comfortable with the sustainability of the dividend.

View our latest analysis for Robinson

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £0.05 in 2015, and the most recent fiscal year payment was £0.06. This means that it has been growing its distributions at 1.8% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Robinson's EPS has fallen by approximately 45% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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 becomes a long term trend.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Robinson will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Robinson that investors need to be conscious of moving forward. 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.