There's A Lot To Like About Paragon Banking Group's (LON:PAG) Upcoming UK£0.14 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Paragon Banking Group PLC (LON:PAG) is about to go ex-dividend in just 4 days. You will need to purchase shares before the 28th of January to receive the dividend, which will be paid on the 26th of February.

Paragon Banking Group's next dividend payment will be UK£0.14 per share. Last year, in total, the company distributed UK£0.14 to shareholders. Looking at the last 12 months of distributions, Paragon Banking Group has a trailing yield of approximately 3.0% on its current stock price of £4.84. If you buy this business for its dividend, you should have an idea of whether Paragon Banking Group's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Paragon Banking Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Paragon Banking Group paid out a comfortable 40% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Paragon Banking Group's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Paragon Banking Group has delivered 15% dividend growth per year on average over the past 10 years.

To Sum It Up

Is Paragon Banking Group an attractive dividend stock, or better left on the shelf? Paragon Banking Group has seen its earnings per share stagnate in recent years, although the company reinvests more than half of its profits in the business, which could bode well for its future prospects. Paragon Banking Group ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Paragon Banking Group for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Paragon Banking Group that you should be aware of before investing in their shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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