Stock Analysis

PayPoint's (LON:PAY) Upcoming Dividend Will Be Larger Than Last Year's

LSE:PAY
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The board of PayPoint plc (LON:PAY) has announced that the dividend on 11th of August will be increased to £0.098, which will be 2.1% higher than last year's payment of £0.096 which covered the same period. This takes the annual payment to 4.9% of the current stock price, which is about average for the industry.

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PayPoint's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 45%, which is in a comfortable range for us.

historic-dividend
LSE:PAY Historic Dividend July 3rd 2025

Check out our latest analysis for PayPoint

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was £0.385, compared to the most recent full-year payment of £0.392. Dividend payments have grown at less than 1% a year over this period. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 14% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We're Not Big Fans Of PayPoint's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, PayPoint has 5 warning signs (and 1 which is a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.