Ninety One Group (LON:N91) Is Increasing Its Dividend To £0.068

The board of Ninety One Group (LON:N91) has announced that the dividend on 7th of August will be increased to £0.068, which will be 6.3% higher than last year's payment of £0.064 which covered the same period. This takes the dividend yield to 6.6%, which shareholders will be pleased with.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Ninety One Group's stock price has increased by 41% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Ninety One Group's Future Dividend Projections Appear 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, Ninety One Group's dividend made up quite a large proportion of earnings but only 34% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 3.0% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 75% - on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for Ninety One Group

Ninety One Group Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of £0.118 in 2020 to the most recent total annual payment of £0.122. Dividend payments have grown at less than 1% a year over this period. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Ninety One Group hasn't seen much change in its earnings per share over the last five years.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Ninety One Group's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 5 analysts we track are forecasting for the future. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.