Paragon Banking Group (LON:PAG) Has Announced That It Will Be Increasing Its Dividend To £0.11
The board of Paragon Banking Group PLC (LON:PAG) has announced that the dividend on 28th of July will be increased to £0.11, which will be 17% higher than last year's payment of £0.094 which covered the same period. Although the dividend is now higher, the yield is only 5.1%, which is below the industry average.
View our latest analysis for Paragon Banking Group
Paragon Banking Group's Earnings Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive. However, Paragon Banking Group's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to fall by 22.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 41%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.06 in 2013, and the most recent fiscal year payment was £0.286. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
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 Paragon Banking Group has grown earnings per share at 19% per year over the past five years. Paragon Banking Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Paragon Banking Group's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Paragon Banking Group you should be aware of, and 1 of them is concerning. Is Paragon Banking 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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