Premier Miton Group's (LON:PMI) Dividend Will Be £0.063

The board of Premier Miton Group plc (LON:PMI) has announced that it will pay a dividend on the 10th of February, with investors receiving £0.063 per share. Based on this payment, the dividend yield on the company's stock will be 9.5%, which is an attractive boost to shareholder returns.

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Premier Miton Group Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, the dividend made up 85% of cash flows, but a higher proportion of net income. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Looking forward, earnings per share is forecast to fall by 35.8% over the next year. If the dividend continues along the path it has been on recently, the company could be paying out more than double what it is earning, which is definitely a bit high to be sustainable going forward.

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 annual payment during the last 6 years was £0.05 in 2016, and the most recent fiscal year payment was £0.10. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that Premier Miton Group's earnings per share has fallen at approximately 5.1% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Premier Miton Group's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Premier Miton Group has 2 warning signs (and 1 which is a bit concerning) we think you should know about. 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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