Waterco's (ASX:WAT) Dividend Will Be A$0.08
Waterco Limited (ASX:WAT) has declared a dividend of A$0.08 per share, yielding 2.3%, payable on November 14. The dividend is well-supported by cash flow and earnings, with a projected payout ratio of 49%. Despite a history of dividend cuts, Waterco has shown a solid growth in earnings per share (EPS) at 26% annually over the past five years. The company appears to be a strong dividend stock, with consistent payments and ample cash generation, although investors should be aware of one warning sign before investing.
Waterco Limited (ASX:WAT) has announced that it will pay a dividend of A$0.08 per share on the 14th of November. This means the dividend yield will be fairly typical at 2.3%.
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Waterco's Projected Earnings Seem Likely To Cover Future Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Waterco's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
If the trend of the last few years continues, EPS will grow by 25.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.
View our latest analysis for Waterco
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from A$0.06 total annually to A$0.15. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Waterco has seen EPS rising for the last five years, at 26% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
Waterco Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
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 example, we've picked out 1 warning sign for Waterco that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
