Castings (LON:CGS) Is Paying Out A Larger Dividend Than Last Year

Castings P.L.C.'s (LON:CGS) dividend will be increasing from last year's payment of the same period to £0.0413 on 4th of January. Despite this raise, the dividend yield of 4.5% is only a modest boost to shareholder returns.

See our latest analysis for Castings

Castings' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Castings was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to grow by 7.1% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 88% which is a bit high but can definitely be sustainable.

Castings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from £0.123 total annually to £0.174. This means that it has been growing its distributions at 3.5% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Castings Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Castings has been growing its earnings per share at 9.9% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Castings Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Castings is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Castings management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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