Severfield (LON:SFR) Has Affirmed Its Dividend Of UK£0.018
Severfield plc (LON:SFR) will pay a dividend of UK£0.018 on the 3rd of September. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.
View our latest analysis for Severfield
Severfield's Earnings Easily Cover the Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Severfield was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
The next year is set to see EPS grow by 15.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 52% 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 2011, the dividend has gone from UK£0.10 to UK£0.029. The dividend has fallen 71% over that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Severfield has seen EPS rising for the last five years, at 14% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Severfield Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Severfield that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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. 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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