Devro's (LON:DVO) Upcoming Dividend Will Be Larger Than Last Year's
Devro plc's (LON:DVO) dividend will be increasing on the 22nd of July to UK£0.065, with investors receiving 3.2% more than last year. This will take the annual payment from 4.5% to 4.5% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Devro
Devro's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Devro's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to fall by 3.2%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 52%, which is comfortable for the company to continue in the future.
Devro Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from UK£0.08 to UK£0.093. This means that it has been growing its distributions at 1.5% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Devro has grown earnings per share at 70% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Devro could prove to be a strong dividend payer.
Devro 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 generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Devro 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.
