The advice of J. Smart & Co. (Contractors) PLC (LON:SMJ) announced that it would pay a dividend of £0.0227 per share on January 30. The dividend yield is 2.0% based on this payout, which is a bit low compared to other companies in the industry.
J. Smart (contractors) payout has strong revenue coverage
Even a low dividend yield can be attractive if it persists for years. Prior to this announcement, J. Smart (Entrepreneurs) earnings easily covered the dividend, but free cash flow was negative. We think cash flow should take priority over earnings, so that’s certainly a concern for the dividend going forward.
Going forward, earnings per share could increase by 14.5% over the next year if the trend of recent years continues. Assuming the dividend continues on recent trends, we think the payout ratio could be 18% by next year, which is in a fairly sustainable range.
J. Smart (entrepreneurs) has a solid track record
The company has a long history of paying stable dividends. Since 2012, the annual payment at the time was £0.029, compared to the last annual payment of £0.0323. This implies that the company has increased its distributions at an annual rate of approximately 1.1% over this period. Dividends have been rising relatively slowly, which isn’t great, but some investors may like the relative consistency of the dividend.
The dividend should increase
Some investors will be eager to buy some of the company’s stock based on its dividend history. J. Smart (Entrepreneurs) has seen EPS increase over the past five years, at 14% per year. EPS growth bodes well for the dividend, as does the low payout ratio the company is currently reporting.
Our Thoughts on the J. Smart Dividend (Entrepreneurs)
In summary, while it’s good to see the dividend hasn’t been cut, we’re a bit cautious about J. Smart’s (entrepreneurs) payouts as there may be issues maintaining them in the future. . With no cash flow, it’s hard to see how the company can sustain a dividend payment. We don’t think J. Smart (entrepreneurs) is a great stock to add to your portfolio if income is your priority.
Companies with a stable dividend policy are likely to enjoy greater investor interest than those that suffer from a more inconsistent approach. Meanwhile, despite the importance of dividend payouts, these are not the only factors our readers should be aware of when evaluating a company. For example, we chose 3 warning signs for J. Smart (Entrepreneurs) that investors should consider. Is J. Smart (Entrepreneurs) not quite the opportunity you were looking for? Why not check out our selection of the best dividend stocks.
Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
Join a Paid User Research Session
You will receive a $30 Amazon Gift Card for 1 hour of your time while helping us create better investment tools for individual investors like you. register here