Fintel (LON:FNTL) Has Announced A Dividend Of £0.013

Fintel Plc's (LON:FNTL) investors are due to receive a payment of £0.013 per share on 31st of October. Based on this payment, the dividend yield for the company will be 1.6%, which is fairly typical for the industry.

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Fintel's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Fintel's dividend was only 63% of earnings, however it was paying out 99% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 156.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

See our latest analysis for Fintel

Fintel's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The annual payment during the last 7 years was £0.0196 in 2018, and the most recent fiscal year payment was £0.0365. This means that it has been growing its distributions at 9.3% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Fintel might have put its house in order since then, but we remain cautious.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though Fintel's EPS has declined at around 10% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Fintel's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Fintel's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Fintel that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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