Lok'nStore Group (LON:LOK) Has Announced That It Will Be Increasing Its Dividend To £0.0575

The board of Lok'nStore Group Plc (LON:LOK) has announced that the dividend on 9th of June will be increased to £0.0575, which will be 15% higher than last year's payment of £0.05 which covered the same period. Even though the dividend went up, the yield is still quite low at only 2.1%.

Check out our latest analysis for Lok'nStore Group

Lok'nStore Group Is Paying Out More Than It Is Earning

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. At the time of the last dividend payment, Lok'nStore Group was paying out a very large proportion of what it was earning and 112% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to fall by 48.4%. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 165%, which is definitely a bit high to be sustainable going forward.

Lok'nStore Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of £0.05 in 2013 to the most recent total annual payment of £0.173. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Lok'nStore Group Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Lok'nStore Group has been growing its earnings per share at 18% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On Lok'nStore Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think Lok'nStore Group will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. As an example, we've identified 3 warning signs for Lok'nStore Group that you should be aware of before investing. 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.