How secure is the Howden Joinery dividend?

How secure is the Howden Joinery dividend?

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There is some evidence that buying progressive dividend payers with solid balance sheets is a strategy well-rewarded by the market. After all, who doesn’t like a steady stream of predictable cash payments?

A reputation as a dependable dividend payer takes years to forge and, once created, is a valuable way for a company to signal its long-term profitability to the market and prospective shareholders. This is why, when it comes to dividend-paying companies such as large cap Home Furnishings operator Howden Joinery (LON:HWDN), which yields 2.15%, it is useful to check how well these payments are covered by earnings.

Earnings per share divided by dividend per share is called dividend cover - and it’s a great way to quickly gauge a company’s capacity to continue its dividend payments

How to interpret Howden Joinery’s dividend cover

Generally speaking, a dividend cover of below 1.5 times is cause for concern. Above 1.5 is good, but it is when you are getting above two times cover that you see the sign of a high-quality, sustainable dividend payment. Let’s see how Howden Joinery measures up.

The group’s trailing twelve month (TTM) earnings per share are 33p and its TTM dividend per share is 12p. Dividing the former by the latter shows that Howden Joinery has a TTM dividend cover of 2.81.

This is a positive sign for shareholders of Howden Joinery. Other checks you can perform to assess dividend safety include:

  • Checking the current ratio is above 1.5 times and preferably above 2x
  • Making sure dividend per share is covered by free cash flow per share
  • Assessing balance sheet health by looking at the group’s gearing ratio

Income investing: what you need to know

For many investors, dividends are a vital part of their long-term strategy. That's why we have created a variety of income-focused stock screens, such as the Best Dividends Screen, to identify promising candidates for income portfolios. Take a look and see if any of the qualifying stocks might be worthy of further research.

If you’d like to discover more about dividend investing, you can read our free ebook: How to Make Money in Dividend Stocks.


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Howden Joinery's StockRank™

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Howden Joinery's StockRank™

With a StockRank of 62, Howden Joinery is more attractive than 61% of the 7,586 stocks we cover in Europe, according to our proprietary ranking system.

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