Stock Analysis

TP ICAP Group (LON:TCAP) Will Pay A Larger Dividend Than Last Year At £0.079

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TP ICAP Group PLC (LON:TCAP) will increase its dividend on the 23rd of May to £0.079, which is 44% higher than last year's payment from the same period of £0.055. This makes the dividend yield 6.0%, which is above the industry average.

View our latest analysis for TP ICAP Group

TP ICAP Group's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, TP ICAP Group was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 83.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.

LSE:TCAP Historic Dividend March 17th 2023

TP ICAP Group's Dividend Has Lacked Consistency

TP ICAP Group has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of £0.112 in 2017 to the most recent total annual payment of £0.10. This works out to be a decline of approximately 1.9% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

TP ICAP Group May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that TP ICAP Group's earnings per share has fallen at approximately 3.5% 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. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, we always like to see the dividend being raised, but we don't think TP ICAP Group will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for TP ICAP Group that investors should know about before committing capital to this stock. Is TP ICAP Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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