4imprint Group's (LON:FOUR) Upcoming Dividend Will Be Larger Than Last Year's

4imprint Group plc (LON:FOUR) will increase its dividend from last year's comparable payment on the 15th of September to $0.508. Even though the dividend went up, the yield is still quite low at only 2.5%.

View our latest analysis for 4imprint Group

4imprint Group'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. The last dividend was quite easily covered by 4imprint Group's earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to grow by 20.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 87%, which is on the higher side, but certainly still feasible.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from $0.229 total annually to $1.60. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. 4imprint Group has impressed us by growing EPS at 26% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that 4imprint Group could prove to be a strong dividend payer.

We Really Like 4imprint Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for 4imprint Group that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.