Young & Co.'s Brewery, P.L.C. (LON:YNGA) will pay a dividend of £0.1088 on the 8th of December. This means the dividend yield will be fairly typical at 2.0%.
Young's Brewery's Earnings Easily Cover The Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite easily covered by Young's Brewery's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 44.3%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was £0.146, compared to the most recent full-year payment of £0.218. This means that it has been growing its distributions at 4.0% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
Dividend Growth May Be Hard To Come By
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Young's Brewery has seen earnings per share falling at 6.9% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
Our Thoughts On Young's Brewery's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.
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. Taking the debate a bit further, we've identified 1 warning sign for Young's Brewery that investors need to be conscious of moving forward. Is Young's Brewery not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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