Here's What We Like About FW Thorpe's (LON:TFW) Upcoming Dividend
Readers hoping to buy FW Thorpe Plc (LON:TFW) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase FW Thorpe's shares before the 5th of November to receive the dividend, which will be paid on the 4th of December.
The company's next dividend payment will be UK£0.0553 per share. Last year, in total, the company distributed UK£0.073 to shareholders. Based on the last year's worth of payments, FW Thorpe stock has a trailing yield of around 2.9% on the current share price of UK£2.49. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. FW Thorpe paid out a comfortable 31% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for FW Thorpe
Click here to see how much of its profit FW Thorpe paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, FW Thorpe's earnings per share have been growing at 12% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. FW Thorpe has delivered 12% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Has FW Thorpe got what it takes to maintain its dividend payments? FW Thorpe has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. FW Thorpe looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
So while FW Thorpe looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for FW Thorpe you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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