Jarvis Securities (LON:JIM) Will Pay A Smaller Dividend Than Last Year

Jarvis Securities plc (LON:JIM) has announced that on 8th of December, it will be paying a dividend of£0.025, which a reduction from last year's comparable dividend. This means the annual payment is 8.3% of the current stock price, which is above the average for the industry.

Check out the opportunities and risks within the GB Capital Markets industry.

Jarvis Securities Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, the dividend made up 92% of cash flows, but a higher proportion of net income. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

EPS is set to grow by 7.2% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 116%, which probably can't continue without starting to put some pressure on the balance sheet.

Jarvis Securities Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the dividend has gone from £0.025 total annually to £0.135. This means that it has been growing its distributions at 18% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Jarvis Securities May Have Challenges Growing The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Jarvis Securities has seen EPS rising for the last five years, at 7.2% per annum. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Jarvis Securities' Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While the current distribution levels might be a bit unsustainable, we can't deny that until now it has been very stable. We don't think Jarvis Securities is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 3 warning signs for Jarvis Securities (of which 1 is a bit unpleasant!) you should know about. Is Jarvis Securities not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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