Jersey Electricity (LON:JEL) Is Increasing Its Dividend To £0.108

Jersey Electricity plc's (LON:JEL) dividend will be increasing from last year's payment of the same period to £0.108 on 23rd of March. The payment will take the dividend yield to 4.5%, which is in line with the average for the industry.

View our latest analysis for Jersey Electricity

Jersey Electricity's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last payment made up 85% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 4.7% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, the payout ratio in 12 months could be 75%, which is more comfortable than the current payout ratio.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from £0.11 total annually to £0.23. This works out to be a compound annual growth rate (CAGR) of approximately 7.7% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Jersey Electricity May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though Jersey Electricity's EPS has declined at around 4.7% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Jersey Electricity's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Jersey Electricity is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Jersey Electricity that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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