Begbies Traynor Group (LON:BEG) Is Increasing Its Dividend To £0.012

Begbies Traynor Group plc (LON:BEG) will increase its dividend on the 5th of May to £0.012, which is 9.1% higher than last year's payment from the same period of £0.011. This will take the annual payment to 3.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Begbies Traynor Group

Begbies Traynor Group's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Looking forward, earnings per share is forecast to rise by 166.7% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 63% which brings it into quite a comfortable range.

Begbies Traynor Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was £0.022 in 2013, and the most recent fiscal year payment was £0.036. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth Could Be Constrained

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Begbies Traynor Group has been growing its earnings per share at 107% a year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

Begbies Traynor Group's Dividend Doesn't Look Sustainable

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. Although they have been consistent in the past, we think the payments are a little high to be sustained. 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. To that end, Begbies Traynor Group has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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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