Grafton Group's (LON:GFTU) Dividend Will Be Increased To £0.26
Grafton Group plc's (LON:GFTU) dividend will be increasing from last year's payment of the same period to £0.26 on 9th of May. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.
Check out our latest analysis for Grafton Group
Grafton Group's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Grafton Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 9.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which is in the range that makes us comfortable with the sustainability of the dividend.
Grafton Group Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was £0.085, compared to the most recent full-year payment of £0.36. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
Grafton Group May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings per share has been crawling upwards at 3.9% per year. The company has been growing at a pretty soft 3.9% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
We Really Like Grafton Group's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 9 Grafton Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.
