Videndum Plc's (LON:VID) dividend will be increasing from last year's payment of the same period to £0.25 on 19th of May. Based on this payment, the dividend yield for the company will be 4.6%, which is fairly typical for the industry.
Check out our latest analysis for Videndum
Videndum's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Videndum was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 11.3%. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from £0.22 total annually to £0.40. This means that it has been growing its distributions at 6.2% per annum 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. Videndum has seen EPS rising for the last five years, at 25% per annum. Videndum is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Videndum Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Videndum is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for Videndum that investors should take into consideration. Is Videndum not quite the opportunity you were looking for? Why not check out our selection of top 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.
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