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Argentex Group Plc's (LON:AGFX) investors are due to receive a payment of UK£0.013 per share on 26th of September. This payment means the dividend yield will be 2.6%, which is below the average for the industry.
Check out our latest analysis for Argentex Group
Argentex Group's Payment Has Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Argentex Group's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
If the trend of the last few years continues, EPS will grow by 25.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.
Argentex Group's Dividend Has Lacked Consistency
Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The most recent annual payment of UK£0.02 is about the same as the first annual payment 2 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings have grown by 25% in the last year. The company could go on to pay a consistent dividend if earnings continue to rise. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend. However, we would never make any decisions based on only a single year of data, especially when assessing long term dividend potential.
Argentex Group Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Argentex Group that investors need to be conscious of moving forward. Is Argentex Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.