Galliford Try Holdings (LON:GFRD) Will Pay A Larger Dividend Than Last Year At £0.075
Galliford Try Holdings plc (LON:GFRD) will increase its dividend from last year's comparable payment on the 8th of December to £0.075. Based on this payment, the dividend yield for the company will be 4.4%, which is fairly typical for the industry.
See our latest analysis for Galliford Try Holdings
Galliford Try Holdings' Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Galliford Try Holdings' profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
EPS is set to grow by 172.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 79%, which is on the higher side, but certainly still feasible.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of £0.33 in 2013 to the most recent total annual payment of £0.105. Dividend payments have fallen sharply, down 68% 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 Has Limited Growth Potential
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Galliford Try Holdings' EPS has declined at around 40% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
Galliford Try Holdings' Dividend Doesn't Look Sustainable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Galliford Try Holdings is a great stock to add to your portfolio if income is your focus.
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 instance, we've picked out 3 warning signs for Galliford Try Holdings that investors should take into consideration. 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.
