Seco/Warwick's (WSE:SWG) Dividend Will Be PLN1.00

The board of Seco/Warwick S.A. (WSE:SWG) has announced that it will pay a dividend on the 23rd of June, with investors receiving PLN1.00 per share. This means the annual payment will be 3.7% of the current stock price, which is lower than the industry average.

Our free stock report includes 3 warning signs investors should be aware of before investing in Seco/Warwick. Read for free now.

Seco/Warwick's Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Seco/Warwick's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 17.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 47%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Seco/Warwick

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from PLN0.75 total annually to PLN1.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

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. Seco/Warwick has seen EPS rising for the last five years, at 12% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Seco/Warwick Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

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. For example, we've picked out 3 warning signs for Seco/Warwick 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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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.