Stock Analysis

Solid State (LON:SOLI) Is Increasing Its Dividend To UK£0.11

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AIM:SOLI
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Solid State plc (LON:SOLI) has announced that it will be increasing its dividend on the 24th of September to UK£0.11. This takes the dividend yield from 1.7% to 1.7%, which shareholders will be pleased with.

Check out our latest analysis for Solid State

Solid State's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Solid State's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 6.3%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

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AIM:SOLI Historic Dividend July 16th 2021

Solid State Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the first annual payment was UK£0.03, compared to the most recent full-year payment of UK£0.16. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Solid State has grown earnings per share at 11% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Solid State's prospects of growing its dividend payments in the future.

Solid State Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Solid State is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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. Are management backing themselves to deliver performance? Check their shareholdings in Solid State in our latest insider ownership analysis. We have also put together a list of global stocks with a solid dividend.

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