Begbies Traynor Group (LON:BEG) Is Increasing Its Dividend To £0.024

Begbies Traynor Group plc (LON:BEG) has announced that it will be increasing its dividend from last year's comparable payment on the 3rd of November to £0.024. This takes the annual payment to 2.4% of the current stock price, which is about average for the industry.

Check out our latest analysis for Begbies Traynor Group

Begbies Traynor Group Is Paying Out More Than It Is Earning

Solid dividend yields are great, but they only really help us if the payment is sustainable. Begbies Traynor Group is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

EPS is forecast to rise very quickly over the next 12 months. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 443%.

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 2012, the annual payment back then was £0.012, compared to the most recent full-year payment of £0.035. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though Begbies Traynor Group's EPS has declined at around 25% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Begbies Traynor Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think Begbies Traynor Group will make a great income stock. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

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. As an example, we've identified 1 warning sign for Begbies Traynor Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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