People Infrastructure's (ASX:PPE) Dividend Will Be Increased To AU$0.06

People Infrastructure Ltd (ASX:PPE) will increase its dividend on the 1st of October to AU$0.06. This takes the dividend yield from 2.9% to 4.0%, which shareholders will be pleased with.

Check out our latest analysis for People Infrastructure

People Infrastructure's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, People Infrastructure is earning enough to cover the payment, but the it makes up 180% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 18.0%. If the dividend continues on this path, the payout ratio could be 73% by next year, which we think can be pretty sustainable going forward.

People Infrastructure Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2018, the first annual payment was AU$0.04, compared to the most recent full-year payment of AU$0.12. This implies that the company grew its distributions at a yearly rate of about 44% over that duration. People Infrastructure has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. People Infrastructure has seen EPS rising for the last five years, at 42% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

In Summary

Overall, we always like to see the dividend being raised, but we don't think People Infrastructure will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for People Infrastructure that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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