It looks like PageGroup plc (LON:PAGE) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 5th of September in order to be eligible for this dividend, which will be paid on the 9th of October.
PageGroup's next dividend payment will be UK£0.17 per share, on the back of last year when the company paid a total of UK£0.26 to shareholders. Based on the last year's worth of payments, PageGroup stock has a trailing yield of around 6.2% on the current share price of £4.186. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. PageGroup paid out a comfortable 39% of its profit last year. A useful secondary check can be to evaluate whether PageGroup generated enough free cash flow to afford its dividend. It paid out more than half (50%) of its free cash flow in the past year, which is within an average range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, PageGroup's earnings per share have been growing at 20% a year for the past five years. PageGroup has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, PageGroup has increased its dividend at approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Has PageGroup got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, PageGroup paid out less than half its earnings and a bit over half its free cash flow. PageGroup looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Curious what other investors think of PageGroup? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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