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Allfunds Group plc (AMS:ALLFG) will increase its dividend from last year's comparable payment on the 13th of May to €0.131. This takes the annual payment to 2.6% of the current stock price, which is about average for the industry.
Allfunds Group's Long-term Dividend Outlook appears Promising
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Allfunds Group is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, so there isn't too much pressure on the dividend.
Check out our latest analysis for Allfunds Group
Allfunds Group Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of €0.05 in 2022 to the most recent total annual payment of €0.131. This means that it has been growing its distributions at 38% per annum over that time. Allfunds Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
Dividend Growth May Be Hard To Come By
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. It's not great to see that Allfunds Group's earnings per share has fallen at approximately 9.6% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think Allfunds Group's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.