The board of Robinson plc (LON:RBN) has announced that it will pay a dividend of £0.025 per share on the 13th of October. The dividend yield will be 5.9% based on this payment which is still above the industry average.
Robinson Might Find It Hard To Continue The Dividend
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Robinson is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.
Over the next year, EPS could expand by 5.3% if recent trends continue. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was £0.04, compared to the most recent full-year payment of £0.055. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend Has Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Robinson has impressed us by growing EPS at 5.3% per year over the past five years. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.
Our Thoughts On Robinson's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Robinson's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Robinson that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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