Income Investors Should Know That Watkin Jones Plc (LON:WJG) Goes Ex-Dividend Soon

It looks like Watkin Jones Plc (LON:WJG) is about to go ex-dividend in the next three days. You will need to purchase shares before the 28th of January to receive the dividend, which will be paid on the 26th of February.

Watkin Jones's next dividend payment will be UK£0.073 per share. Last year, in total, the company distributed UK£0.073 to shareholders. Calculating the last year's worth of payments shows that Watkin Jones has a trailing yield of 3.7% on the current share price of £1.98. If you buy this business for its dividend, you should have an idea of whether Watkin Jones's dividend is reliable and sustainable. As a result, readers should always check whether Watkin Jones has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Watkin Jones

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 89% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 38% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Watkin Jones's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 69% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Watkin Jones has delivered 23% dividend growth per year on average over the past five years. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Watkin Jones is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

Final Takeaway

Should investors buy Watkin Jones for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. All things considered, we are not particularly enthused about Watkin Jones from a dividend perspective.

With that being said, if dividends aren't your biggest concern with Watkin Jones, you should know about the other risks facing this business. Every company has risks, and we've spotted 4 warning signs for Watkin Jones you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

When trading Watkin Jones or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.