Zotefoams (LON:ZTF) Has Announced That It Will Be Increasing Its Dividend To £0.0228
The board of Zotefoams plc (LON:ZTF) has announced that it will be increasing its dividend by 4.6% on the 6th of October to £0.0228, up from last year's comparable payment of £0.0218. Even though the dividend went up, the yield is still quite low at only 1.9%.
Check out our latest analysis for Zotefoams
Zotefoams' Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Zotefoams' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 25.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was £0.052 in 2013, and the most recent fiscal year payment was £0.069. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Zotefoams Could Grow Its Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Zotefoams has seen EPS rising for the last five years, at 6.5% per annum. Zotefoams definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on Zotefoams management tenure, salary, and performance. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
