Robinson (LON: RBN) increases dividend to UK £ 0.025

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Robinson plc (LON: RBN) will increase its dividend on October 8 to UK £ 0.025. This will bring the annual payout to 4.7% of the share price, which is higher than what most companies in the industry pay.

See our latest analysis for Robinson

Robinson’s dividend is well covered by earnings

Impressive dividend yields are good, but it doesn’t matter much if the payouts can’t be sustained. Prior to this announcement, the dividend was 6,573% of earnings and the company was generating negative free cash flow. This high level of a dividend payment could start to put pressure on the balance sheet in the future.

According to analysts, EPS is expected to be several times higher next year. Assuming the dividend continues according to recent trends, we estimate that the payout ratio could reach 66%, which is within a comfortable range for us.

OBJECTIVE: Historic RBN dividend August 22, 2021

Dividend volatility

The company has a long history of dividends, but it doesn’t look good with the cuts of the past. As of 2011, the first annual payment was UK £ 0.033, compared to the most recent annual payment of UK £ 0.085. This works out to a compound annual growth rate (CAGR) of around 10% per year during that time. Dividends have grown rapidly during this time, but with reductions in the past, we are not sure this stock will be a reliable source of income in the future.

The dividend has limited growth potential

With a relatively volatile dividend, it is even more important to see if earnings per share increase. Robinson’s EPS has fallen about 50% per year for the past five years. A sharp drop in earnings per share isn’t terrible from a dividend standpoint. Even conservative payout ratios can be put under pressure if earnings fall enough. On the bright side, earnings should gain ground over the next year or so, but until that turns into a trend, we wouldn’t feel too comfortable.

Robinson’s dividend doesn’t look great

In summary, investors would like to receive a higher dividend, but we wonder if it can be sustained over the long term. The company doesn’t earn enough to pay as much as it does, and the other factors don’t look particularly promising either. Overall, the dividend is not reliable enough to make it a good income security.

It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. Still, there are a host of other factors that investors need to consider, aside from dividend payments, when analyzing a business. For example, we have identified 5 warning signs for Robinson (1 is significant!) That you should know before investing. Looking for more high yield dividend ideas? Try our organized list of big dividend payers.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in the mentioned stocks.
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