Premier Miton Group's (LON:PMI) Dividend Will Be £0.03

The board of Premier Miton Group plc (LON:PMI) has announced that it will pay a dividend on the 16th of February, with investors receiving £0.03 per share. However, the dividend yield of 9.4% is still a decent boost to shareholder returns.

See our latest analysis for Premier Miton Group

Premier Miton Group Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 240% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

The next 12 months is set to see EPS grow by 100.1%. If the dividend continues on its recent course, the payout ratio in 12 months could be 127%, which is a bit high and could start applying pressure to the balance sheet.

Premier Miton Group's Dividend Has Lacked Consistency

Looking back, Premier Miton Group's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of £0.05 in 2016 to the most recent total annual payment of £0.06. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 27% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Premier Miton Group's Dividend Doesn't Look Great

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. The dividend doesn't inspire confidence that it will provide solid income in the future.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Premier Miton Group you should be aware of, and 1 of them can't be ignored. Is Premier Miton Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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