Wincanton (LON:WIN) Has Announced That It Will Be Increasing Its Dividend To £0.08

Wincanton plc (LON:WIN) will increase its dividend on the 5th of August to £0.08, which is 6.7% higher than last year's payment from the same period of £0.075. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Wincanton

Wincanton's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Wincanton was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 18.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Wincanton's Dividend Has Lacked Consistency

Looking back, Wincanton's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the dividend has gone from £0.055 total annually to £0.12. This works out to be a compound annual growth rate (CAGR) of approximately 14% 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.

Wincanton May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Wincanton has only grown its earnings per share at 2.5% per annum over the past five years. While EPS growth is quite low, Wincanton has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Wincanton's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Wincanton that investors should take into consideration. Is Wincanton not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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