Arbuthnot Banking Group's (LON:ARBB) Dividend Will Be Increased To £0.25

Arbuthnot Banking Group PLC (LON:ARBB) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of June to £0.25. Based on this payment, the dividend yield for the company will be 4.7%, which is fairly typical for the industry.

View our latest analysis for Arbuthnot Banking Group

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

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, Arbuthnot Banking Group has a long history of paying out a part of its earnings to shareholders. Based on Arbuthnot Banking Group's last earnings report, the payout ratio is at a decent 39%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 80.5%. Analysts forecast the future payout ratio could be 25% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £0.25 in 2013, and the most recent fiscal year payment was £0.44. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Arbuthnot Banking Group has been growing its earnings per share at 51% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Arbuthnot Banking Group's Dividend

Overall, a dividend increase is always good, and we think that Arbuthnot Banking Group is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 instance, we've picked out 1 warning sign for Arbuthnot Banking Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.