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The board of Concurrent Technologies Plc (LON:CNC) has announced that it will be increasing its dividend by 4.5% on the 1st of October to UK£0.011. This will take the dividend yield from 2.6% to 2.6%, providing a nice boost to shareholder returns.
Concurrent Technologies' Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Concurrent Technologies' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 1.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 64% by next year, which we think can be pretty sustainable going forward.
Concurrent Technologies Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from UK£0.015 in 2011 to the most recent annual payment of UK£0.026. This implies that the company grew its distributions at a yearly rate of about 5.7% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend's Growth Prospects Are Limited
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately, Concurrent Technologies' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.9% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Concurrent Technologies Looks Like A Great Dividend Stock
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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Concurrent Technologies that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.
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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