Marshalls (LON:MSLH) Is Due To Pay A Dividend Of £0.054

Marshalls plc (LON:MSLH) will pay a dividend of £0.054 on the 1st of July. This means that the annual payment is 3.3% of the current stock price, which is lower than what the rest of the industry is paying.

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Marshalls' Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Marshalls was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 75.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Marshalls

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was £0.0525, compared to the most recent full-year payment of £0.08. This means that it has been growing its distributions at 4.3% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Marshalls' EPS has declined at around 16% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.

Our Thoughts On Marshalls' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Marshalls that investors should know about before committing capital to this stock. 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.