STV Group (LON:STVG) Is Due To Pay A Dividend Of £0.039
STV Group plc (LON:STVG) has announced that it will pay a dividend of £0.039 per share on the 2nd of November. Based on this payment, the dividend yield on the company's stock will be 5.9%, which is an attractive boost to shareholder returns.
View our latest analysis for STV Group
STV Group's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, STV Group was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
The next year is set to see EPS grow by 56.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.
STV Group's Dividend Has Lacked Consistency
It's comforting to see that STV Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the dividend has gone from £0.0297 total annually to £0.113. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. STV Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. STV Group has impressed us by growing EPS at 55% per year over the past five years. STV Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about STV Group's payments, as there could be some issues with sustaining them into the future. While STV Group is earning enough to cover the payments, the cash flows are lacking. We don't think STV Group is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 5 warning signs for STV Group (3 shouldn't be ignored!) that you should be aware of before investing. 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.
