Wilson Bayly Holmes-Ovcon's (JSE:WBO) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Wilson Bayly Holmes-Ovcon Limited (JSE:WBO) has announced that it will be paying its dividend of ZAR3.20 on the 27th of October, an increased payment from last year's comparable dividend. This makes the dividend yield 4.1%, which is above the industry average.

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Wilson Bayly Holmes-Ovcon's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Wilson Bayly Holmes-Ovcon was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 40.3%. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Wilson Bayly Holmes-Ovcon

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ZAR3.68 in 2015 to the most recent total annual payment of ZAR6.40. This means that it has been growing its distributions at 5.7% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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. We are encouraged to see that Wilson Bayly Holmes-Ovcon has grown earnings per share at 37% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Wilson Bayly Holmes-Ovcon's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Wilson Bayly Holmes-Ovcon that you should be aware of before investing. 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.