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STV Group plc's (LON:STVG) dividend will be increasing to UK£0.073 on 27th of May. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for STV Group
STV Group's Earnings Easily Cover the Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, STV Group's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to fall by 5.1% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 26%, which is comfortable for the company to continue in the future.
STV Group's Dividend Has Lacked Consistency
It's comforting to see that STV Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the dividend has gone from UK£0.03 to UK£0.15. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
We Could See STV Group's Dividend Growing
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see STV Group has been growing its earnings per share at 5.2% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for STV Group's prospects of growing its dividend payments in the future.
Our Thoughts On STV Group's Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for STV Group (1 can't be ignored!) that you should be aware of before investing. Is STV Group not quite the opportunity you were looking for? Why not check out our selection of top 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.