Savills' (LON:SVS) Dividend Will Be Increased To £0.069
The board of Savills plc (LON:SVS) has announced that the dividend on 2nd of October will be increased to £0.069, which will be 4.5% higher than last year's payment of £0.066 which covered the same period. This takes the annual payment to 3.9% of the current stock price, which is about average for the industry.
View our latest analysis for Savills
Savills' Payment Has Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Savills' dividend was only 32% of earnings, however it was paying out 379% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
Looking forward, earnings per share is forecast to rise by 33.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from £0.16 total annually to £0.356. This means that it has been growing its distributions at 8.3% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Savills has only grown its earnings per share at 2.6% per annum over the past five years. While EPS growth is quite low, Savills has the option to increase the payout ratio to return more cash to shareholders.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Savills will make a great income stock. While Savills is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Savills that investors should take into consideration. Is Savills 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.
