EMIS Group plc's (LON:EMIS) dividend will be increasing to UK£0.18 on 4th of November. This makes the dividend yield 2.4%, which is above the industry average.
View our latest analysis for EMIS Group
EMIS Group's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend made up a very large portion of earnings and also represented 77% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.
Looking forward, earnings per share is forecast to rise by 10.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 72%, which is in the range that makes us comfortable with the sustainability of the dividend.
EMIS Group Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from UK£0.11 in 2011 to the most recent annual payment of UK£0.35. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that EMIS Group has grown earnings per share at 53% per year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why EMIS Group is not retaining those earnings to reinvest in growth.
Our Thoughts On EMIS Group's Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 EMIS Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. We have also put together a list of global stocks with a solid dividend.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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