Volution Group (LON:FAN) Is Increasing Its Dividend To £0.055

The board of Volution Group plc (LON:FAN) has announced that the dividend on 19th of December will be increased to £0.055, which will be 10.0% higher than last year's payment of £0.05 which covered the same period. This takes the annual payment to 2.3% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Volution Group

Volution Group's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Volution Group was quite comfortably earning enough to cover the dividend. 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 18.2%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

Volution Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2014, the annual payment back then was £0.021, compared to the most recent full-year payment of £0.08. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. It's encouraging to see that Volution Group has been growing its earnings per share at 23% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Volution Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Volution Group is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for Volution Group for free with public analyst estimates for the company. Is Volution Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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