Advertisement
New Zealand markets closed
  • NZX 50

    11,875.67
    -55.65 (-0.47%)
     
  • NZD/USD

    0.5947
    +0.0009 (+0.15%)
     
  • NZD/EUR

    0.5580
    +0.0007 (+0.13%)
     
  • ALL ORDS

    8,007.50
    -42.70 (-0.53%)
     
  • ASX 200

    7,751.60
    -36.50 (-0.47%)
     
  • OIL

    85.25
    -0.41 (-0.48%)
     
  • GOLD

    2,371.10
    -3.00 (-0.13%)
     
  • NASDAQ

    18,003.49
    -304.51 (-1.66%)
     
  • FTSE

    7,995.58
    +71.78 (+0.91%)
     
  • Dow Jones

    37,983.24
    -475.86 (-1.24%)
     
  • DAX

    17,930.32
    -24.18 (-0.13%)
     
  • Hang Seng

    16,600.34
    -121.35 (-0.73%)
     
  • NIKKEI 225

    39,144.63
    -378.92 (-0.96%)
     
  • NZD/JPY

    91.4650
    +0.4720 (+0.52%)
     

Unilever (LON:ULVR) Will Pay A Smaller Dividend Than Last Year

Unilever PLC ( LON:ULVR ) has announced that on 22nd of March, it will be paying a dividend of £0.3647, which a reduction from last year's comparable dividend. The yield is still above the industry average at 3.7%.

View our latest analysis for Unilever

Unilever's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Unilever's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 16.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 52% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of £1.08 in 2014 to the most recent total annual payment of £1.74. This implies that the company grew its distributions at a yearly rate of about 4.9% 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.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that Unilever's earnings per share has fallen at approximately 5.8% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Unilever's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

ADVERTISEMENT

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Unilever that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.