Chemring Group PLC (LON:CHG) has declared a dividend of £0.026 per share, to be paid on September 6th. This results in a dividend yield of 1.8%, which is in line with industry standards.
Chemring Group’s dividend is currently 64% of earnings, but 175% of free cash flows, indicating a focus on returning cash to shareholders. However, such high cash flow payouts could put the dividend at risk of being reduced in the future.
Earnings per share are expected to grow by 108.2% next year, potentially lowering the payout ratio to 31%, which should be sustainable. The company has a history of dividend cuts, with payments decreasing by less than 1% annually since 2014.
Despite the fluctuating dividend, Chemring Group has seen EPS increase by 17% annually for the past five years. While the company appears attractive as an income stock based on earnings, the high cash payout ratio raises caution.
Overall, while dividend growth is positive, Chemring Group’s dividend stability is questionable due to weak cash flows. Investors may prefer companies with a more consistent dividend policy. Additionally, there are other factors to consider before investing, such as potential warning signs specific to Chemring Group.