Barclays PLC (LON:BARC) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of September to £0.0225. This takes the annual payment to 5.0% of the current stock price, which is about average for the industry.
See our latest analysis for Barclays
Barclays' Dividend Forecasted To Be Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time.
Barclays has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, Barclays' payout ratio sits at 21%, an extremely comfortable number that shows that it can pay its dividend.
Looking forward, EPS is forecast to rise by 25.8% over the next 3 years. Analysts estimate the future payout ratio will be 29% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the dividend has gone from £0.06 total annually to £0.0825. This means that it has been growing its distributions at 3.2% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Barclays has impressed us by growing EPS at 26% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
We Really Like Barclays' Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Barclays that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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