discoverIE Group (LON:DSCV) Is Increasing Its Dividend To £0.079
The board of discoverIE Group plc (LON:DSCV) has announced that the dividend on 1st of August will be increased to £0.079, which will be 6.0% higher than last year's payment of £0.0745 which covered the same period. Despite this raise, the dividend yield of 1.2% is only a modest boost to shareholder returns.
View our latest analysis for discoverIE Group
discoverIE Group's Payment Has Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. The last dividend was quite easily covered by discoverIE Group's earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 7.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was £0.08 in 2013, and the most recent fiscal year payment was £0.115. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
We Could See discoverIE Group's Dividend Growing
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that discoverIE Group has grown earnings per share at 8.3% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
discoverIE Group Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that discoverIE Group is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 10 discoverIE Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is discoverIE 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.
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