M Winkworth (LON:WINK) Has Re-Affirmed Its Dividend Of UK£0.027

M Winkworth PLC (LON:WINK) will pay a dividend of UK£0.027 on the 19th of May. This makes the dividend yield 8.5%, which will augment investor returns quite nicely.

Check out our latest analysis for M Winkworth

M Winkworth Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, M Winkworth was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 36.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 142%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was UK£0.043 in 2012, and the most recent fiscal year payment was UK£0.093. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. M Winkworth might have put its house in order since then, but we remain cautious.

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. We are encouraged to see that M Winkworth has grown earnings per share at 17% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

M Winkworth Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think M Winkworth might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for M Winkworth (of which 1 is significant!) you should know about. Is M Winkworth not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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