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The board of Wentworth Resources plc (LON:WEN) has announced that the dividend on 29th of July will be increased to UK£0.012, which will be 16% higher than last year. This will take the annual payment from 7.1% to 7.1% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Wentworth Resources
Wentworth Resources' Earnings Easily Cover the Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Wentworth Resources was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to fall by 8.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 62%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Wentworth Resources Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from US$0.01 in 2019 to the most recent annual payment of US$0.022. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Wentworth Resources has impressed us by growing EPS at 24% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Wentworth Resources could prove to be a strong dividend payer.
Wentworth Resources Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Wentworth Resources is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.