Begbies Traynor Group's (LON:BEG) Shareholders Will Receive A Bigger Dividend Than Last Year

Begbies Traynor Group plc (LON:BEG) has announced that it will be increasing its periodic dividend on the 5th of May to £0.012, which will be 9.1% higher than last year's comparable payment amount of £0.011. This makes the dividend yield about the same as the industry average at 2.5%.

View our latest analysis for Begbies Traynor Group

Begbies Traynor Group's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand 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.

Begbies Traynor Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from £0.022 total annually to £0.036. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. 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

The company's investors will be pleased to have been receiving dividend income for some time. Begbies Traynor Group has seen EPS rising for the last five years, at 107% per annum. Although earnings per share is up nicely Begbies Traynor Group is paying out 157% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

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. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.