EJF Investments (LON:EJFI) Is Paying Out A Dividend Of £0.0268

EJF Investments Limited (LON:EJFI) has announced that it will pay a dividend of £0.0268 per share on the 30th of November. This means the annual payment is 9.6% of the current stock price, which is above the average for the industry.

View our latest analysis for EJF Investments

EJF Investments' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, EJF Investments' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 3.0% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 49%, which we are pretty comfortable with and we think is feasible on an earnings basis.

EJF Investments Doesn't Have A Long Payment History

It is great to see that EJF Investments has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 6 years was £0.096 in 2017, and the most recent fiscal year payment was £0.107. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. EJF Investments has seen earnings per share falling at 3.0% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about EJF Investments' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. However, there are other things to consider for investors when analysing stock performance. To that end, EJF Investments has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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