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Bridgepoint Group plc's (LON:BPT) investors are due to receive a payment of £0.046 per share on 22nd of May. The payment will take the dividend yield to 3.6%, which is in line with the average for the industry.
We've discovered 4 warning signs about Bridgepoint Group. View them for free.
Bridgepoint Group's Payment Could Potentially Have Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Looking forward, earnings per share is forecast to rise by 186.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be , which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
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Bridgepoint Group Is Still Building Its Track Record
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The annual payment during the last 3 years was £0.0364 in 2022, and the most recent fiscal year payment was £0.092. This works out to be a compound annual growth rate (CAGR) of approximately 36% a year over that time. Bridgepoint 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.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Earnings per share has been sinking by 64% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
We're Not Big Fans Of Bridgepoint Group's Dividend
Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, the dividend is not reliable enough to make this a good income stock.