Stock Analysis

PSC Insurance Group (ASX:PSI) Is Increasing Its Dividend To A$0.075

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PSC Insurance Group Limited's (ASX:PSI) dividend will be increasing from last year's payment of the same period to A$0.075 on 12th of October. This takes the annual payment to 2.3% of the current stock price, which is about average for the industry.

Check out our latest analysis for PSC Insurance Group

PSC Insurance Group Doesn't Earn Enough To Cover Its Payments

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, PSC Insurance Group's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

If the company can't turn things around, EPS could fall by 2.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 186%, which could put the dividend under pressure if earnings don't start to improve.

ASX:PSI Historic Dividend September 2nd 2022

PSC Insurance Group Is Still Building Its Track Record

It is great to see that PSC Insurance Group has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2015, the annual payment back then was A$0.024, compared to the most recent full-year payment of A$0.12. This means that it has been growing its distributions at 26% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. PSC Insurance Group has seen earnings per share falling at 2.7% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

PSC Insurance Group's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think PSC Insurance Group is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for PSC Insurance Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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PSC Insurance Group

PSC Insurance Group Limited provides diversified insurance services in Australia, the United Kingdom, Hong Kong, and New Zealand.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Future Growth4
Past Performance1
Financial Health6

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet with reasonable growth potential.