Treatt (LON:TET) Will Pay A Larger Dividend Than Last Year At £0.0581

The board of Treatt plc (LON:TET) has announced that the dividend on 13th of March will be increased to £0.0581, which will be 6.4% higher than last year's payment of £0.0546 which covered the same period. This takes the annual payment to 1.7% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Treatt

Treatt's Projected Earnings Seem Likely To Cover Future Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. 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.

Over the next year, EPS is forecast to expand by 34.7%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Treatt Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from £0.037 total annually to £0.0841. This implies that the company grew its distributions at a yearly rate of about 8.6% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Treatt has grown earnings per share at 7.3% per year over the past five years. Treatt definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. 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 in all, this checks a lot of the boxes we look for when choosing an 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. 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 6 analysts we track are forecasting for Treatt for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.