Stock Analysis

Savills (LON:SVS) Has Announced That It Will Be Increasing Its Dividend To £0.066

LSE:SVS
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Savills plc's (LON:SVS) dividend will be increasing from last year's payment of the same period to £0.066 on 5th of October. Although the dividend is now higher, the yield is only 2.4%, which is below the industry average.

Check out our latest analysis for Savills

Savills' 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. Before making this announcement, Savills was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 8.1%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 72%, which is comfortable for the company to continue in the future.

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LSE:SVS Historic Dividend August 15th 2022

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of £0.135 in 2012 to the most recent total annual payment of £0.255. This means that it has been growing its distributions at 6.6% per annum 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. Savills might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Savills has been growing its earnings per share at 13% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Savills' prospects of growing its dividend payments in the future.

We Really Like Savills' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For instance, we've picked out 1 warning sign for Savills that investors should take into consideration. Is Savills not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.