Knights Group Holdings (LON:KGH) Is Due To Pay A Dividend Of £0.0161

Knights Group Holdings plc's (LON:KGH) investors are due to receive a payment of £0.0161 per share on 15th of March. This will take the dividend yield to an attractive 3.1%, providing a nice boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Knights Group Holdings' stock price has increased by 52% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Knights Group Holdings

Knights Group Holdings' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Knights Group Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 102.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Knights Group Holdings' Dividend Has Lacked Consistency

It's comforting to see that Knights Group Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 5 years was £0.012 in 2019, and the most recent fiscal year payment was £0.0411. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

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. We are encouraged to see that Knights Group Holdings has grown earnings per share at 18% per year over the past five years. Knights Group Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Knights Group Holdings Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Knights Group Holdings that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.