Investec Group's (JSE:INL) Upcoming Dividend Will Be Larger Than Last Year's
Investec Group's (JSE:INL) dividend will be increasing from last year's payment of the same period to £3.52 on 22nd of December. The payment will take the dividend yield to 5.5%, which is in line with the average for the industry.
Check out our latest analysis for Investec Group
Investec Group Not Expected To Earn Enough To Cover Its Payments
We aren't too impressed by dividend yields unless they can be sustained over time.
Investec Group has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 46%, which means that Investec Group would be able to pay its last dividend without pressure on the balance sheet.
Earnings per share could rise by 6.0% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the future payout ratio could reach 1,058%, which probably can't continue without starting to put some pressure on the balance sheet.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of £0.162 in 2013 to the most recent total annual payment of £0.285. This means that it has been growing its distributions at 5.8% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend Has Growth Potential
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. It's encouraging to see that Investec Group has been growing its earnings per share at 6.0% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Our Thoughts On Investec Group's Dividend
Overall, we always like to see the dividend being raised, but we don't think Investec Group will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Investec Group has been making. We don't think Investec Group is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Investec Group that investors need to be conscious of moving forward. 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.
