Stock Analysis

Begbies Traynor Group (LON:BEG) Has Announced That It Will Be Increasing Its Dividend To £0.012

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Begbies Traynor Group plc's (LON:BEG) periodic dividend will be increasing on the 5th of May to £0.012, with investors receiving 9.1% more than last year's £0.011. This takes the annual payment to 2.5% of the current stock price, which is about average for the industry.

View our latest analysis for Begbies Traynor Group

Begbies Traynor Group's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

The next year is set to see EPS grow by 166.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 63%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

AIM:BEG Historic Dividend February 1st 2023

Begbies Traynor Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the annual payment back then was £0.022, compared to the most recent full-year payment of £0.036. This means that it has been growing its distributions at 5.0% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Begbies Traynor Group Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Begbies Traynor Group has seen EPS rising for the last five years, at 107% per annum. EPS has been growing well, but Begbies Traynor Group has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Begbies Traynor Group's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 identified 2 warning signs for Begbies Traynor Group (1 is a bit unpleasant!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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