Breedon Group (LON:BREE) Has Announced A Dividend Of £0.0475

The board of Breedon Group plc (LON:BREE) has announced that it will pay a dividend of £0.0475 per share on the 7th of November. This takes the annual payment to 3.9% of the current stock price, which is about average for the industry.

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Breedon Group's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite comfortably covered by Breedon Group's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 71.2%. 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.

See our latest analysis for Breedon Group

Breedon Group's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. Since 2021, the annual payment back then was £0.05, compared to the most recent full-year payment of £0.148. This means that it has been growing its distributions at 31% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Breedon Group has seen EPS rising for the last five years, at 22% per annum. Breedon Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Breedon Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think Breedon Group will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 Breedon Group that investors need to be conscious of moving forward. Is Breedon Group not quite the opportunity you were looking for? Why not check out our selection of top 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.