In This Article:
The board of Vp plc (LON:VP.) has announced that it will pay a dividend on the 15th of January, with investors receiving £0.115 per share. Based on this payment, the dividend yield on the company's stock will be 6.6%, which is an attractive boost to shareholder returns.
See our latest analysis for Vp
Vp's Projections Indicate Future Payments May Be Unsustainable
Estimates Indicate Vp's Could Struggle to Maintain Dividend Payments In The Future
Vp's Future Dividends May Potentially Be At Risk
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. These payout levels would generally be quite difficult to keep up.
EPS is forecast to rise very quickly over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 172%, which is unsustainable.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was £0.14, compared to the most recent full-year payment of £0.39. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Vp has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
Dividend Growth May Be Hard To Come By
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. Over the past five years, it looks as though Vp's EPS has declined at around 6.5% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. 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 can turn into a longer term trend.
We're Not Big Fans Of Vp's Dividend
Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.