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The Sage Group plc's (LON:SGE) investors are due to receive a payment of £0.0745 per share on 27th of June. Based on this payment, the dividend yield for the company will be 1.6%, which is fairly typical for the industry.
Sage Group's Payment Could Potentially Have Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Sage Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Over the next year, EPS is forecast to expand by 69.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.
See our latest analysis for Sage Group
Sage Group Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of £0.121 in 2015 to the most recent total annual payment of £0.205. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. However, Sage Group has only grown its earnings per share at 3.1% per annum over the past five years. The company has been growing at a pretty soft 3.1% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
We Really Like Sage Group's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Sage Group that investors should take into consideration. 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.