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The Berkeley Group Holdings plc (LON:BKG) will increase its dividend from last year's comparable payment on the 8th of September to £0.593. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.
See our latest analysis for Berkeley Group Holdings
Berkeley Group Holdings' Payment Has Solid Earnings Coverage
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Berkeley Group Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to fall by 17.1%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 32%, which is comfortable for the company to continue in the future.
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 £0.325 in 2013 to the most recent total annual payment of £0.694. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Dividend Growth May Be Hard To Come By
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's not great to see that Berkeley Group Holdings' earnings per share has fallen at approximately 7.2% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Berkeley Group Holdings that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.