Savills' (LON:SVS) Upcoming Dividend Will Be Larger Than Last Year's
Savills plc (LON:SVS) has announced that it will be increasing its periodic dividend on the 2nd of October to £0.069, which will be 4.5% higher than last year's comparable payment amount of £0.066. The payment will take the dividend yield to 4.0%, which is in line with the average for the industry.
Check out our latest analysis for Savills
Savills' Dividend Is Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Savills was paying only paying out a fraction of earnings, but the payment was a massive 379% of 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 30.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. 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. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Savills May Find It Hard To Grow The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 2.6% per year. If Savills is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Savills that you should be aware of before investing. 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.
