Phoenix Group Holdings plc (LON:PHNX) will increase its dividend on the 9th of May to UK£0.25. This will take the dividend yield to an attractive 7.6%, providing a nice boost to shareholder returns.
View our latest analysis for Phoenix Group Holdings
Phoenix Group Holdings' Distributions May Be Difficult To Sustain
If the payments aren't sustainable, a high yield for a few years won't matter that much. Despite not generating a profit, Phoenix Group Holdings is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
If the trend of the last few years continues, EPS will grow by 8.3% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.
Phoenix Group Holdings Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from UK£0.42 in 2012 to the most recent annual payment of UK£0.50. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
We Could See Phoenix Group Holdings' Dividend Growing
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Phoenix Group Holdings has grown earnings per share at 8.3% per year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think Phoenix Group Holdings will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Phoenix Group Holdings is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Phoenix Group Holdings that investors need to be conscious of moving forward. 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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