Readers hoping to buy Personal Group Holdings Plc (LON:PGH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 8th of August in order to be eligible for this dividend, which will be paid on the 20th of September.
Personal Group Holdings’s next dividend payment will be UK£0.058 per share, on the back of last year when the company paid a total of UK£0.23 to shareholders. Last year’s total dividend payments show that Personal Group Holdings has a trailing yield of 5.9% on the current share price of £3.98. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. It paid out 84% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We’d be concerned if earnings began to decline.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That’s why it’s comforting to see Personal Group Holdings’s earnings have been skyrocketing, up 31% per annum for the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Personal Group Holdings has delivered an average of 5.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Personal Group Holdings is keeping back more of its profits to grow the business.
To Sum It Up
Is Personal Group Holdings an attractive dividend stock, or better left on the shelf? Earnings per share are growing nicely, and Personal Group Holdings is paying out a percentage of its earnings that is around the average for dividend-paying stocks. In summary, Personal Group Holdings appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
Keen to explore more data on Personal Group Holdings’s financial performance? Check out our visualisation of its historical revenue and earnings growth.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.