Solid State's (LON:SOLI) Dividend Will Be Increased To £0.135

Solid State plc (LON:SOLI) has announced that it will be increasing its periodic dividend on the 29th of September to £0.135, which will be 1.9% higher than last year's comparable payment amount of £0.133. Based on this payment, the dividend yield for the company will be 1.5%, which is fairly typical for the industry.

Check out our latest analysis for Solid State

Solid State's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Solid State was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 2.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 38%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Solid State Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was £0.075, compared to the most recent full-year payment of £0.20. This means that it has been growing its distributions at 10% per annum 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

The company's investors will be pleased to have been receiving dividend income for some time. Solid State has impressed us by growing EPS at 17% 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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Solid State analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.