Yahoo Finance Interested In Watkin Jones' (LON:WJG) Upcoming UK£0.056 Dividend? You Have Three Days Left
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Watkin Jones Plc (LON:WJG) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Watkin Jones investors that purchase the stock on or after the 27th of January will not receive the dividend, which will be paid on the 25th of February.
The company's next dividend payment will be UK£0.056 per share. Last year, in total, the company distributed UK£0.082 to shareholders. Based on the last year's worth of payments, Watkin Jones has a trailing yield of 3.1% on the current stock price of £2.68. 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 Watkin Jones
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Watkin Jones paid out more than half (50%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 42% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
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 fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Watkin Jones's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Watkin Jones has delivered 21% dividend growth per year on average over the past six years.
To Sum It Up
Should investors buy Watkin Jones for the upcoming dividend? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. In summary, while it has some positive characteristics, we're not inclined to race out and buy Watkin Jones today.
If you're not too concerned about Watkin Jones's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Watkin Jones has 1 warning sign we think you should be aware of.
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.
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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.
