Chemring Group (LON:CHG) Will Pay A Larger Dividend Than Last Year At £0.023
The board of Chemring Group PLC (LON:CHG) has announced that it will be increasing its dividend by 21% on the 8th of September to £0.023, up from last year's comparable payment of £0.019. This takes the annual payment to 1.9% of the current stock price, which unfortunately is below what the industry is paying.
Check out our latest analysis for Chemring Group
Chemring Group's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Chemring Group was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Over the next year, EPS is forecast to expand by 46.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was £0.095, compared to the most recent full-year payment of £0.057. Doing the maths, this is a decline of about 5.0% per year. 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 dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Chemring Group has grown earnings per share at 48% per year over the past five years. Chemring Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
We Really Like Chemring Group's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for Chemring Group for free with public analyst estimates for the company. 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.
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