We Wouldn't Be Too Quick To Buy Wynnstay Group Plc (LON:WYN) Before It Goes Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Wynnstay Group Plc (LON:WYN) is about to go ex-dividend in just 2 days. Investors can purchase shares before the 26th of September in order to be eligible for this dividend, which will be paid on the 31st of October.
Wynnstay Group's next dividend payment will be UK£0.05 per share, on the back of last year when the company paid a total of UK£0.1 to shareholders. Looking at the last 12 months of distributions, Wynnstay Group has a trailing yield of approximately 4.8% on its current stock price of £2.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for Wynnstay Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Wynnstay Group paying out a modest 38% of its earnings. A useful secondary check can be to evaluate whether Wynnstay Group generated enough free cash flow to afford its dividend. Wynnstay Group paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Wynnstay Group's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, ten years ago, Wynnstay Group has lifted its dividend by approximately 18% a year on average.
The Bottom Line
Has Wynnstay Group got what it takes to maintain its dividend payments? It's disappointing to see earnings per share have fallen slightly, even though Wynnstay Group is paying out less than half its income as dividends. It's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Wynnstay Group.
Ever wonder what the future holds for Wynnstay Group? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
