Galliford Try Holdings' (LON:GFRD) Upcoming Dividend Will Be Larger Than Last Year's
The board of Galliford Try Holdings PLC (LON:GFRD) has announced that it will be paying its dividend of £0.058 on the 9th of December, an increased payment from last year's comparable dividend. This will take the annual payment to 5.1% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Galliford Try Holdings
Galliford Try Holdings Is Paying Out More Than It Is Earning
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 138% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 49%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
If the company can't turn things around, EPS could fall by 37.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 150%, which could put the dividend under pressure if earnings don't start to improve.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of £0.30 in 2012 to the most recent total annual payment of £0.08. The dividend has fallen 73% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth Potential Is Shaky
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Galliford Try Holdings' earnings per share has shrunk at 37% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
The Dividend Could Prove To Be Unreliable
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. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Galliford Try Holdings that investors need to be conscious of moving forward. Is Galliford Try Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
