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Genuit Group plc (LON:GEN) will increase its dividend from last year's comparable payment on the 4th of June to £0.084. This takes the annual payment to 3.4% of the current stock price, which is about average for the industry.
We've discovered 2 warning signs about Genuit Group. View them for free.
Genuit Group's Projected Earnings Seem Likely To Cover Future Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before this announcement, Genuit Group was paying out 93% of earnings, but a comparatively small 41% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
Looking forward, earnings per share is forecast to rise by 85.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 53%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
Check out our latest analysis for Genuit Group
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £0.03 in 2015, and the most recent fiscal year payment was £0.125. This means that it has been growing its distributions at 15% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Genuit Group's EPS has fallen by approximately 12% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Genuit Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.