Fuller Smith & Turner (LON:FSTA) Will Pay A Larger Dividend Than Last Year At £0.0663
Fuller, Smith & Turner P.L.C. (LON:FSTA) has announced that it will be increasing its periodic dividend on the 2nd of January to £0.0663, which will be 42% higher than last year's comparable payment amount of £0.0468. This takes the annual payment to 2.2% of the current stock price, which is about average for the industry.
See our latest analysis for Fuller Smith & Turner
Fuller Smith & Turner's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Fuller Smith & Turner's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.
Over the next year, EPS is forecast to expand by 97.7%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 46% which would be quite comfortable going to take the dividend forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was £0.137 in 2013, and the most recent fiscal year payment was £0.147. Its dividends have grown at less than 1% per annum over this time frame. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
Dividend Growth Potential Is Shaky
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. Over the past five years, it looks as though Fuller Smith & Turner's EPS has declined at around 16% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think Fuller Smith & Turner's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Fuller Smith & Turner 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.
