Treatt (LON:TET) Is Paying Out A Larger Dividend Than Last Year
Treatt plc (LON:TET) will increase its dividend on the 14th of March to £0.0546, which is 2.1% higher than last year's payment from the same period of £0.0535. Even though the dividend went up, the yield is still quite low at only 1.6%.
Check out our latest analysis for Treatt
Treatt's Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by Treatt's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 57.8%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.
Treatt Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of £0.0318 in 2014 to the most recent total annual payment of £0.0801. This implies that the company grew its distributions at a yearly rate of about 9.7% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Treatt May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 2.0% per annum over the last five years, which admittedly is a bit slow. Growth of 2.0% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
We Really Like Treatt's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Treatt that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
