Pollen Street Group (LON:POLN) Will Pay A Dividend Of £0.27

Pollen Street Group Limited's (LON:POLN) investors are due to receive a payment of £0.27 per share on 24th of October. This will take the dividend yield to an attractive 5.8%, providing a nice boost to shareholder returns.

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Pollen Street Group's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Pollen Street Group's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 21.5% over the next year. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Pollen Street Group

Pollen Street Group's Dividend Has Lacked Consistency

Pollen Street Group has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was £0.0844, compared to the most recent full-year payment of £0.54. This means that it has been growing its distributions at 23% per annum over that time. Pollen Street Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Pollen Street Group has seen EPS rising for the last five years, at 6.1% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Pollen Street Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Pollen Street Group's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Pollen Street Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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