If you are an income investor, then Pennon Group Plc (LON:PNN) should be on your radar. Pennon Group Plc engages in the environmental infrastructure businesses worldwide. Over the past 10 years, the UK£3.0b market cap company has been growing its dividend payments, from £0.20 to £0.39. Currently yielding 5.6%, let’s take a closer look at Pennon Group’s dividend profile.
What Is A Dividend Rock Star?
It is a stock that pays a stable and consistent dividend, having done so reliably for the past decade with the expectation of this continuing into the future. More specifically:
- Its annual yield is among the top 25% of dividend payers
- It has paid dividend every year without dramatically reducing payout in the past
- Its has increased its dividend per share amount over the past
- It can afford to pay the current rate of dividends from its earnings
- It is able to continue to payout at the current rate in the future
High Yield And Dependable
Pennon Group’s yield sits at 5.6%, which is high for Water Utilities stocks. But the real reason Pennon Group stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you’re investor who wants a robust cash inflow from your portfolio over a long period of time.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of PNN it has increased its DPS from £0.20 to £0.39 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes PNN a true dividend rockstar.
The company currently pays out 80% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect PNN’s payout to remain around the same level at 77% of its earnings, which leads to a dividend yield of around 6.3%. Moreover, EPS should increase to £0.51.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
With Pennon Group producing strong dividend income for your portfolio over the past few years, you can take comfort in knowing that this stock will still continue to be a top dividend generator moving forward. However, given this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for PNN’s future growth? Take a look at our free research report of analyst consensus for PNN’s outlook.
- Valuation: What is PNN worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether PNN is currently mispriced by the market.
- Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.