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The Property Franchise Group PLC's (LON:TPFG) periodic dividend will be increasing on the 6th of October to £0.046, with investors receiving 9.5% more than last year's £0.042. Based on this payment, the dividend yield for the company will be 4.5%, which is fairly typical for the industry.
Check out our latest analysis for Property Franchise Group
Property Franchise Group's Earnings Easily Cover The Distributions
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Property Franchise Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
EPS is set to fall by 4.1% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 69%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Property Franchise Group's Dividend Has Lacked Consistency
Property Franchise Group has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was £0.026 in 2014, and the most recent fiscal year payment was £0.13. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Property Franchise Group has been growing its earnings per share at 12% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
We Really Like Property Franchise Group's Dividend
Overall, a dividend increase is always good, and we think that Property Franchise Group is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.