Electronics manufacturer Stadium (SDM:AIM) could be set to lift 2017’s forecast dividend payout of 3p per share by as much as a third.

At the root of the move is a tidying up of its balance sheet to release around £5m of funding currently tied up in a share premium account.

Stadium says this process ‘would create additional distributable reserves which would provide the company with further flexibility in relation to the payment of future dividends.’

However, CEO Charlie Peppiatt has told Shares that some of the funds released would likely be used to continue the company’s expansion into higher margin growth markets, such as power supply, wireless components and human-machine interface technology.

Stadium has already won the backing of shareholders, who voted in favour at a meeting on 19 January. Next the company must apply to the High Court for permission, although that appears to be little more than a box-ticking exercise.

Assuming this proves the case, a dividend increase to a 4p per share looks well within Stadium’s funding capacity, in our view.

It would imply a dividend cash commitment of a little more than £1m a year, comfortably covered by operating cash flows.

The share price has already started moving, rising from 84p to 95p this year. A 4p dividend would equate to 4.2% yield based on the latest share price. (SF)

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