Advertisement
U.S. markets open in 2 hours 4 minutes
  • S&P Futures

    5,306.50
    -1.75 (-0.03%)
     
  • Dow Futures

    40,143.00
    -1.00 (-0.00%)
     
  • Nasdaq Futures

    18,493.50
    -10.25 (-0.06%)
     
  • Russell 2000 Futures

    2,139.60
    +1.20 (+0.06%)
     
  • Crude Oil

    82.46
    +1.11 (+1.36%)
     
  • Gold

    2,232.10
    +19.40 (+0.88%)
     
  • Silver

    24.75
    -0.00 (-0.01%)
     
  • EUR/USD

    1.0797
    -0.0033 (-0.30%)
     
  • 10-Yr Bond

    4.1960
    0.0000 (0.00%)
     
  • Vix

    12.98
    +0.20 (+1.56%)
     
  • dólar/libra

    1.2626
    -0.0012 (-0.09%)
     
  • USD/JPY

    151.3610
    +0.1150 (+0.08%)
     
  • Bitcoin USD

    70,764.52
    +649.82 (+0.93%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,956.38
    +24.40 (+0.31%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Waterco (ASX:WAT) Is Increasing Its Dividend To AU$0.04

Waterco Limited (ASX:WAT) will increase its dividend on the 15th of December to AU$0.04. This makes the dividend yield 2.2%, which is above the industry average.

See our latest analysis for Waterco

Waterco's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Waterco was paying a whopping 117% as a dividend, but this only made up 20% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the trend of the last few years continues, EPS will grow by 36.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
historic-dividend

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from AU$0.09 in 2011 to the most recent annual payment of AU$0.08. Doing the maths, this is a decline of about 1.2% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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 impressed us by growing EPS at 36% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Waterco's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Waterco's payments are rock solid. While Waterco is earning enough to cover the payments, the cash flows are lacking. We don't think Waterco is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Waterco that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Advertisement