Begbies Traynor Group (LON:BEG) Is Due To Pay A Dividend Of £0.013

The board of Begbies Traynor Group plc (LON:BEG) has announced that it will pay a dividend on the 7th of May, with investors receiving £0.013 per share. This takes the dividend yield to 3.3%, which shareholders will be pleased with.

See our latest analysis for Begbies Traynor Group

Begbies Traynor Group's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 1,494% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 57%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 62% which is fairly sustainable.

Begbies Traynor Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was £0.022 in 2013, and the most recent fiscal year payment was £0.038. This means that it has been growing its distributions at 5.6% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Begbies Traynor Group's earnings per share has shrunk at 23% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Begbies Traynor Group's payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income 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. As an example, we've identified 4 warning signs for Begbies Traynor Group that you should be aware of before investing. Is Begbies Traynor Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.