Ventia Services Group (ASX:VNT) Is Paying Out A Larger Dividend Than Last Year

Ventia Services Group Limited's (ASX:VNT) periodic dividend will be increasing on the 8th of October to A$0.1071, with investors receiving 15% more than last year's A$0.0935. This makes the dividend yield about the same as the industry average at 3.6%.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Ventia Services Group's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before this announcement, Ventia Services Group was paying out 72% of earnings, but a comparatively small 56% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next year is set to see EPS grow by 23.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 74%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Ventia Services Group

Ventia Services Group Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2022, the dividend has gone from A$0.0147 total annually to A$0.2. This works out to be a compound annual growth rate (CAGR) of approximately 139% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Ventia Services Group has been growing its earnings per share at 50% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Ventia Services Group is not retaining those earnings to reinvest in growth.

We Really Like Ventia Services Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Ventia Services Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.