Wincanton's (LON:WIN) Dividend Will Be Increased To UK£0.08
The board of Wincanton plc (LON:WIN) has announced that it will be increasing its dividend by 6.7% on the 5th of August to UK£0.08. This will take the dividend yield from 3.3% to 3.3%, providing a nice boost to shareholder returns.
View our latest analysis for Wincanton
Wincanton's Earnings Easily Cover the Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Wincanton was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 3.1%. 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.
Wincanton's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The first annual payment during the last 6 years was UK£0.055 in 2016, and the most recent fiscal year payment was UK£0.12. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
Dividend Growth May Be Hard To Achieve
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. Earnings has been rising at 2.5% per annum over the last five years, which admittedly is a bit slow. If Wincanton is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
Our Thoughts On Wincanton's Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Wincanton that you should be aware of before investing. Is Wincanton not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
