TP ICAP Group's (LON:TCAP) Dividend Will Be Increased To £0.079

The board of TP ICAP Group PLC (LON:TCAP) has announced that it will be paying its dividend of £0.079 on the 23rd of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 7.0%, which shareholders will be pleased with.

See our latest analysis for TP ICAP Group

TP ICAP Group's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, TP ICAP Group was paying out 94% of earnings, but a comparatively small 35% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 83.8% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 43% which brings it into quite a comfortable range.

TP ICAP Group's Dividend Has Lacked Consistency

It's comforting to see that TP ICAP Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 6 years was £0.112 in 2017, and the most recent fiscal year payment was £0.124. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. 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.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, TP ICAP Group's earnings per share has shrunk at approximately 3.5% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On TP ICAP Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think TP ICAP 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for TP ICAP Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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