Arbuthnot Banking Group (LON:ARBB) Is Increasing Its Dividend To £0.19

The board of Arbuthnot Banking Group PLC (LON:ARBB) has announced that the dividend on 22nd of September will be increased to £0.19, which will be 12% higher than last year's payment of £0.17 which covered the same period. This takes the annual payment to 3.9% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Arbuthnot Banking Group

Arbuthnot Banking Group's Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

Arbuthnot Banking Group has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, Arbuthnot Banking Group's payout ratio sits at 20%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, EPS is forecast to rise by 0.3% over the next 3 years. Analysts forecast the future payout ratio could be 24% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was £0.25, compared to the most recent full-year payment of £0.42. This implies that the company grew its distributions at a yearly rate of about 5.3% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Arbuthnot Banking Group might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Arbuthnot Banking Group has impressed us by growing EPS at 123% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Arbuthnot Banking Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Arbuthnot Banking Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.