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A Prominent Player of Industrial Sector Samuel Heath & Sons plc is approaching its ex-dividend date, making this a crucial time for shareholders and those tracking the industrial stock. The ex-dividend date is the cutoff for investors who wish to receive the upcoming dividend, as any trades made on or after the 15th of August will not be eligible for the dividend payment scheduled for the 20th of September.
The company's next dividend is set at £0.085625 per share, contributing to a total payout of £0.12 per share over the last 12 months. This results in a trailing yield of approximately 2.9%, based on the current share price of £4.10. While dividends are often an appealing source of income, it's important to assess whether Samuel Heath & Sons (LSE:HSM) can sustain these payments and the potential for future growth.
A key aspect of dividend sustainability is whether the company’s profits are sufficient to cover these payouts. Fortunately, Samuel Heath & Sons has a modest payout ratio, distributing just 26% of its profits as dividends. However, cash flow is another critical factor, and in this case, the company has paid out more in dividends than it generated in free cash flow, raising some concerns about the long-term sustainability of its dividend.
Potential for Future Dividend
While flat earnings can still offer value, they might not inspire confidence in the dividend’s growth prospects. Over the past five years, Samuel Heath & Sons has seen little change in its earnings per share, which raises questions about the potential for future dividend growth. Additionally, the company’s dividends have remained largely unchanged over the past decade, indicating limited historical growth in its payouts.
Samuel Heath & Sons plc's ability to maintain its dividend payments may face challenges, given the flat earnings and the discrepancy between profits and cash flow. The stock’s current dividend payout appears to be modest relative to its profits, but the higher percentage of cash flow paid out could be a point of concern. While this may not be a cause for immediate alarm, it suggests that there could be other stocks with potentially more sustainable dividend profiles in the market.