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Pendal Group Limited (ASX: PDL) will increase its dividend on December 16 to AU $ 0.24. This brings the dividend yield from 6.0% to 6.0%, which shareholders will be delighted with.
Check out our latest review for Pendal Group
Pendal Group does not earn enough to cover its payments
If the payments are not sustainable, a high return for a few years will not matter much. The last payment was 79% of the profits, but the cash flow was much higher. This leaves a lot of money to reinvest in the business.
EPS is expected to decline 6.2% over the next 12 months. If the dividend continues on the same path as it was recently, the payout ratio in 12 months could be 95%, which is certainly a bit high to be sustainable going forward.
Dividend volatility
The company has a long history of dividends, but it doesn’t look good with the cuts of the past. Since 2011, the first annual payment was AU $ 0.16, compared to the most recent annual payment of AU $ 0.41. This means that he increased his distributions to 9.9% per annum during that period. We love to see dividends rise at a reasonable rate, but with at least a substantial reduction in payouts, we’re not sure this dividend stock would be ideal for someone who intends to live off their income.
Dividend Growth Can Be Hard To Achieve
Growth in earnings per share could be a mitigating factor considering past dividend fluctuations. It’s not great to see that Pendal Group’s earnings per share have fallen by around 3.1% per year over the past five years. If the company earns less over time, it naturally follows that it will also have to pay less dividends.
The company has also raised capital by issuing shares equal to 20% of the outstanding shares in the past 12 months. Doing this regularly can be detrimental – it is difficult to increase dividends per share when new shares are regularly created.
Our thoughts on the Pendal Group dividend
Overall, it’s probably not a high-income stock, although the dividend is being increased. The company generates a lot of cash, which could hold the dividend for a while, but the track record is not great. We would probably look elsewhere for an income investment.
Companies with a stable dividend policy are likely to benefit from greater investor interest than those with a more inconsistent approach. At the same time, there are other factors that our readers should be aware of before investing any capital in a stock. For example, we have chosen 3 warning signs for Pendal Group that investors should consider. Looking for more high yield dividend ideas? Try our organized list of big dividend payers.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in the mentioned stocks.
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