Knights Group Holdings (LON:KGH) Will Pay A Larger Dividend Than Last Year At £0.0279

Knights Group Holdings plc (LON:KGH) will increase its dividend on the 27th of September to £0.0279, which is 12% higher than last year's payment from the same period of £0.025. This takes the dividend yield to 3.3%, which shareholders will be pleased with.

Check out our latest analysis for Knights Group Holdings

Knights Group Holdings' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Knights Group Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 71.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Knights Group Holdings' Dividend Has Lacked Consistency

Looking back, Knights Group Holdings' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2018, the annual payment back then was £0.012, compared to the most recent full-year payment of £0.044. This means that it has been growing its distributions at 24% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. Knights Group Holdings has seen EPS rising for the last five years, at 14% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Knights Group Holdings' Dividend

Overall, a dividend increase is always good, and we think that Knights Group Holdings is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend 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. For instance, we've picked out 2 warning signs for Knights Group Holdings that investors should take into consideration. Is Knights Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.

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