Begbies Traynor Group (LON:BEG) Is Paying Out A Larger Dividend Than Last Year

The board of Begbies Traynor Group plc (LON:BEG) has announced that it will be increasing its dividend by 9.1% on the 5th of May to £0.012, up from last year's comparable payment of £0.011. Based on this payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.

See our latest analysis for Begbies Traynor Group

Begbies Traynor Group's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, earnings per share is forecast to rise by 166.7% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 63% which would be quite comfortable going to take the dividend forward.

Begbies Traynor Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from £0.022 total annually to £0.036. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Begbies Traynor Group's Dividend Might Lack Growth

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. 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. While EPS is growing rapidly, Begbies Traynor Group paid out a very high 157% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

The Dividend Could Prove To Be Unreliable

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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Begbies Traynor Group (of which 1 is a bit unpleasant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.