Should Income Investors Look At Tyman plc (LON:TYMN) Before Its Ex-Dividend?
Readers hoping to buy Tyman plc (LON:TYMN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 1st of August, you won't be eligible to receive this dividend, when it is paid on the 6th of September.
Tyman's next dividend payment will be UK£0.038 per share, on the back of last year when the company paid a total of UK£0.12 to shareholders. Based on the last year's worth of payments, Tyman stock has a trailing yield of around 5.6% on the current share price of £2.15. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Tyman has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Tyman
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Last year, Tyman paid out 97% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.
It's good to see that while Tyman's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Tyman has grown its earnings rapidly, up 82% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 8 years, Tyman has increased its dividend at approximately 25% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Should investors buy Tyman for the upcoming dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Tyman is paying out so much of its profit. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Tyman's dividend merits.
Ever wonder what the future holds for Tyman? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
