Volution Group (LON:FAN) Has Announced That It Will Be Increasing Its Dividend To £0.074

Volution Group plc's (LON:FAN) dividend will be increasing from last year's payment of the same period to £0.074 on 16th of December. Even though the dividend went up, the yield is still quite low at only 1.6%.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Volution Group's Projected Earnings Seem Likely To Cover Future Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite easily covered by Volution Group's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 55.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Volution Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.021 in 2015, and the most recent fiscal year payment was £0.108. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Volution Group has grown earnings per share at 34% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Volution Group could prove to be a strong dividend payer.

We Really Like Volution Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Volution Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.