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James Halstead (LON:JHD) Has Announced A Dividend Of £0.055

The board of James Halstead plc (LON:JHD) has announced that it will pay a dividend of £0.055 per share on the 16th of December. This means that the annual payment will be 3.9% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for James Halstead

James Halstead's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, James Halstead's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 1,014% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 3.4%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 81% which is a bit high but can definitely be sustainable.

historic-dividend
historic-dividend

James Halstead Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the dividend has gone from £0.0358 total annually to £0.0775. This means that it has been growing its distributions at 8.0% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately, James Halstead's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

James Halstead's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, James Halstead has 2 warning signs (and 1 which is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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