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Premier Miton Group plc's (LON:PMI) investors are due to receive a payment of £0.03 per share on 14th of February. Based on this payment, the dividend yield on the company's stock will be 9.7%, which is an attractive boost to shareholder returns.
View our latest analysis for Premier Miton Group
Premier Miton Group's Projections Indicate Future Payments May Be Unsustainable
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 484% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we could see the payout ratio reach 103%, which is on the unsustainable side.
Premier Miton Group's Dividend Has Lacked Consistency
Looking back, Premier Miton Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2017, the annual payment back then was £0.05, compared to the most recent full-year payment of £0.06. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 35% over the last 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. 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.
Premier Miton Group's Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Premier Miton Group make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.