Putprop Limited's (JSE:PPR) periodic dividend will be increasing on the 28th of October to ZAR0.085, with investors receiving 21% more than last year's ZAR0.07. Despite this raise, the dividend yield of 4.1% is only a modest boost to shareholder returns.
View our latest analysis for Putprop
Putprop's Earnings Easily Cover The Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Putprop was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
If the trend of the last few years continues, EPS will grow by 18.2% over the next 12 months. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ZAR0.36 in 2014, and the most recent fiscal year payment was ZAR0.13. This works out to be a decline of approximately 9.7% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Putprop has been growing its earnings per share at 18% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
Putprop 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Putprop has 5 warning signs (and 2 which are concerning) we think you should know about. 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.
About JSE:PPR
Moderate with proven track record.
