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

Arbuthnot Banking Group PLC's (LON:ARBB) dividend will be increasing from last year's payment of the same period to £0.19 on 22nd of September. The payment will take the dividend yield to 4.6%, which is in line with the average for the industry.

See our latest analysis for Arbuthnot Banking Group

Arbuthnot Banking Group's Payment Expected To Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Arbuthnot Banking Group has a long history of paying out dividends, with its current track record at a minimum of 10 years. 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.

Over the next 3 years, EPS is forecast to expand by 2.5%. Analysts estimate the future payout ratio will be 24% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Since 2013, the annual payment back then was £0.25, compared to the most recent full-year payment of £0.44. This implies that the company grew its distributions at a yearly rate of about 5.8% 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

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Arbuthnot Banking Group has grown earnings per share at 124% 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.

We Really Like Arbuthnot Banking Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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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