Curtis Banks Group PLC's (LON:CBP) investors are due to receive a payment of UK£0.065 per share on 1st of June. The dividend yield is 3.6% based on this payment, which is a little bit low compared to the other companies in the industry.
See our latest analysis for Curtis Banks Group
Curtis Banks 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. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. We think that this practice can make the dividend quite risky in the future.
Looking forward, earnings per share is forecast to rise by 42.8% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 64% which brings it into quite a comfortable range.
Curtis Banks Group's Dividend Has Lacked Consistency
Curtis Banks Group has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2016, the first annual payment was UK£0.035, compared to the most recent full-year payment of UK£0.09. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Curtis Banks Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
Curtis Banks Group Could Grow Its Dividend
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. Curtis Banks Group has impressed us by growing EPS at 10.0% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Curtis Banks Group's payments, as there could be some issues with sustaining them into the future. Strong earnings growth means Curtis Banks Group has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.