M Winkworth PLC (LON:WINK) has announced that it will be increasing its dividend on the 17th of February to UK£0.065. This makes the dividend yield 8.4%, which is above the industry average.
View our latest analysis for M Winkworth
M Winkworth Is Paying Out More Than It Is Earning
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, M Winkworth was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to fall by 11.3%. If the dividend continues along recent trends, we estimate the payout ratio could reach 117%, which could put the dividend in jeopardy if the company's earnings don't improve.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from UK£0.043 in 2012 to the most recent annual payment of UK£0.093. This implies that the company grew its distributions at a yearly rate of about 8.0% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
We Could See M Winkworth's Dividend Growing
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. M Winkworth has seen EPS rising for the last five years, at 7.8% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, M Winkworth has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. We have also put together a list of global stocks with a solid dividend.
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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.
About AIM:WINK
M Winkworth
Operates as a franchisor to the Winkworth estate agencies in the United Kingdom.
Flawless balance sheet with solid track record and pays a dividend.
