Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Premier Miton Group plc (LON:PMI) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 14th of January will not receive this dividend, which will be paid on the 12th of February.
Premier Miton Group's next dividend payment will be UK£0.045 per share, and in the last 12 months, the company paid a total of UK£0.07 per share. Looking at the last 12 months of distributions, Premier Miton Group has a trailing yield of approximately 4.5% on its current stock price of £1.56. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Premier Miton Group
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Premier Miton Group distributed an unsustainably high 169% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Premier Miton Group's earnings per share have been growing at 17% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Premier Miton Group has delivered an average of 8.8% per year annual increase in its dividend, based on the past four years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy Premier Miton Group for the upcoming dividend? Premier Miton Group has been generating credible earnings per share growth, although its dividend payments were not adequately covered by earnings. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.
So if you want to do more digging on Premier Miton Group, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 4 warning signs for Premier Miton Group you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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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About AIM:PMI
Flawless balance sheet with reasonable growth potential.
