Yahoo Finance SThree's (LON:STEM) Dividend Will Be Increased To £0.05
SThree plc's (LON:STEM) dividend will be increasing from last year's payment of the same period to £0.05 on 2nd of December. This will take the dividend yield to an attractive 3.4%, providing a nice boost to shareholder returns.
Check out our latest analysis for SThree
SThree's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, SThree's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to fall by 4.9% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 30%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of £0.14 in 2012 to the most recent total annual payment of £0.13. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. SThree has impressed us by growing EPS at 11% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for SThree's prospects of growing its dividend payments in the future.
SThree Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for SThree (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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