Viva Energy Group (ASX:VEA) Is Increasing Its Dividend To A$0.137

The board of Viva Energy Group Limited (ASX:VEA) has announced that it will be paying its dividend of A$0.137 on the 22nd of September, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 2.2%.

View our latest analysis for Viva Energy Group

Viva Energy Group Doesn't Earn Enough To Cover Its Payments

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by Viva Energy Group's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 39.5% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 115%, which is definitely a bit high to be sustainable going forward.

Viva Energy Group's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of A$0.0589 in 2018 to the most recent total annual payment of A$0.064. This means that it has been growing its distributions at 2.1% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Viva Energy Group's earnings per share has shrunk at 23% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Viva Energy Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Viva Energy Group's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Viva Energy Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Viva Energy Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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