Personal Group Holdings Plc (LON:PGH) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 20th of February, you won’t be eligible to receive this dividend, when it is paid on the 27th of March.
Personal Group Holdings’s next dividend payment will be UK£0.059 per share. Last year, in total, the company distributed UK£0.23 to shareholders. Calculating the last year’s worth of payments shows that Personal Group Holdings has a trailing yield of 5.9% on the current share price of £4.03. If you buy this business for its dividend, you should have an idea of whether Personal Group Holdings’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. It paid out 82% 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.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s encouraging to see Personal Group Holdings has grown its earnings rapidly, up 32% a year for the past five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Personal Group Holdings has delivered 3.6% dividend growth per year on average over the past ten years. It’s good to see both earnings and the dividend have improved – although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
Is Personal Group Holdings worth buying for its dividend? 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. We think this is a pretty attractive combination, and would be interested in investigating Personal Group Holdings more closely.
Want to learn more about Personal Group Holdings? Here’s a visualisation of its historical rate of 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.
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