Fintel (LON:FNTL) Has Announced A Dividend Of £0.012

The board of Fintel Plc (LON:FNTL) has announced that it will pay a dividend on the 1st of November, with investors receiving £0.012 per share. Even though the dividend went up, the yield is still quite low at only 1.2%.

View our latest analysis for Fintel

Fintel's Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Fintel was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 159.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Fintel's Dividend Has Lacked Consistency

Looking back, Fintel's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the dividend has gone from £0.0196 total annually to £0.0345. This works out to be a compound annual growth rate (CAGR) of approximately 9.9% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Fintel has seen earnings per share falling at 4.9% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Fintel is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Fintel that investors should take into consideration. Is Fintel not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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