Moneysupermarket.com Group (LON:MONY) Will Pay A Dividend Of £0.089
Moneysupermarket.com Group PLC's (LON:MONY) investors are due to receive a payment of £0.089 per share on 10th of May. The dividend yield will be 5.0% based on this payment which is still above the industry average.
Check out our latest analysis for Moneysupermarket.com Group
Moneysupermarket.com Group's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, Moneysupermarket.com Group was paying out 89% of earnings, but a comparatively small 71% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Looking forward, earnings per share is forecast to rise by 32.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
Moneysupermarket.com Group Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of £0.0574 in 2014 to the most recent total annual payment of £0.121. This implies that the company grew its distributions at a yearly rate of about 7.7% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Moneysupermarket.com Group May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. In the last five years, Moneysupermarket.com Group's earnings per share has shrunk at approximately 3.5% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.
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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
