Flight Centre Travel Group's (ASX:FLT) Dividend Will Be A$0.29

Flight Centre Travel Group Limited's (ASX:FLT) investors are due to receive a payment of A$0.29 per share on 16th of October. The dividend yield of 3.1% is still a nice boost to shareholder returns, despite the cut.

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Flight Centre Travel Group's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Flight Centre Travel Group's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 238% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, earnings per share is forecast to rise by 177.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

See our latest analysis for Flight Centre Travel Group

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of A$1.52 in 2015 to the most recent total annual payment of A$0.40. This works out to a decline of approximately 74% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Flight Centre Travel Group's Dividend Might Lack Growth

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's encouraging to see that Flight Centre Travel Group has been growing its earnings per share at 73% a year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. Strong earnings growth means Flight Centre Travel Group has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 1 warning sign for Flight Centre Travel Group that investors should take into consideration. Is Flight Centre Travel Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.