Treatt (LON:TET) Is Increasing Its Dividend To £0.0546

Treatt plc (LON:TET) will increase its dividend on the 14th of March to £0.0546, which is 2.1% higher than last year's payment from the same period of £0.0535. Although the dividend is now higher, the yield is only 1.7%, which is below the industry average.

See our latest analysis for Treatt

Treatt's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Treatt's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 57.8% over the next year. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Treatt Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was £0.031, compared to the most recent full-year payment of £0.0785. This implies that the company grew its distributions at a yearly rate of about 9.7% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Treatt May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 2.1% per year. While growth may be thin on the ground, Treatt could always pay out a higher proportion of earnings to increase shareholder returns.

Treatt Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Treatt is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for Treatt for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.