Yahoo Finance Rentokil Initial (LON:RTO) Is Due To Pay A Dividend Of £0.0316
The board of Rentokil Initial plc (LON:RTO) has announced that it will pay a dividend of £0.0316 per share on the 16th of September. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.
View our latest analysis for Rentokil Initial
Rentokil Initial's Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Rentokil Initial's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 97.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of £0.0231 in 2014 to the most recent total annual payment of £0.0868. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Rentokil Initial has impressed us by growing EPS at 13% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
We Really Like Rentokil Initial's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Rentokil Initial that investors should know about before committing capital to this stock. 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.
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