Endeavour Group's (ASX:EDV) Dividend Will Be A$0.125

The board of Endeavour Group Limited (ASX:EDV) has announced that it will pay a dividend on the 10th of April, with investors receiving A$0.125 per share. The yield is still above the industry average at 5.2%.

Check out our latest analysis for Endeavour Group

Endeavour Group's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Endeavour Group's dividend made up quite a large proportion of earnings but only 40% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 20.0%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 72% which would be quite comfortable going to take the dividend forward.

Endeavour Group's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of A$0.07 in 2021 to the most recent total annual payment of A$0.218. This implies that the company grew its distributions at a yearly rate of about 33% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Endeavour Group Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Endeavour Group has impressed us by growing EPS at 28% per year over the past five years. However, Endeavour Group isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Endeavour Group that investors should take into consideration. Is Endeavour Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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