Wickes Group (LON:WIX) Has Announced A Dividend Of £0.073

Wickes Group plc (LON:WIX) has announced that it will pay a dividend of £0.073 per share on the 6th of June. This makes the dividend yield 7.3%, which will augment investor returns quite nicely.

See our latest analysis for Wickes Group

Wickes Group's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Wickes Group's dividend made up quite a large proportion of earnings but only 20% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 61.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Wickes Group's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2021, the dividend has gone from £0.042 total annually to £0.109. This works out to be a compound annual growth rate (CAGR) of approximately 37% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Wickes Group's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Wickes Group has impressed us by growing EPS at 15% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Wickes Group that investors should know about before committing capital to this stock. Is Wickes Group 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.