Johns Lyng Group Limited's (ASX:JLG) investors are due to receive a payment of A$0.047 per share on 19th of March. Including this payment, the dividend yield on the stock will be 1.5%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Johns Lyng Group

Johns Lyng Group's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Johns Lyng Group's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 63.6%. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Johns Lyng Group Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of A$0.019 in 2018 to the most recent total annual payment of A$0.094. This works out to be a compound annual growth rate (CAGR) of approximately 31% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Johns Lyng Group has seen EPS rising for the last five years, at 25% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Johns Lyng Group could prove to be a strong dividend payer.

We Really Like Johns Lyng Group's Dividend

Overall, we like to see the dividend staying consistent, and we think Johns Lyng Group might even raise payments in the future. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Johns Lyng Group that investors need to be conscious of moving forward. Is Johns Lyng Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.