MJ Gleeson (LON:GLE) Is Increasing Its Dividend To £0.12
The board of MJ Gleeson plc (LON:GLE) has announced that it will be paying its dividend of £0.12 on the 25th of November, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 3.8%, which is below the industry average.
Check out our latest analysis for MJ Gleeson
MJ Gleeson's Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, MJ Gleeson's dividend was only 30% of earnings, however it was paying out 129% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
Looking forward, earnings per share is forecast to rise by 38.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £0.05 in 2012, and the most recent fiscal year payment was £0.18. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
MJ Gleeson May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, MJ Gleeson has only grown its earnings per share at 4.2% per annum over the past five years. While EPS growth is quite low, MJ Gleeson has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On MJ Gleeson's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While MJ Gleeson is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
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. For instance, we've picked out 1 warning sign for MJ Gleeson that investors should take into consideration. Is MJ Gleeson not quite the opportunity you were looking for? Why not check out our selection of top 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.
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