TP ICAP Group's (LON:TCAP) Shareholders Will Receive A Bigger Dividend Than Last Year

TP ICAP Group PLC (LON:TCAP) will increase its dividend on the 4th of November to £0.045, which is 13% higher than last year's payment from the same period of £0.04. This will take the dividend yield to an attractive 6.3%, providing a nice boost to shareholder returns.

View our latest analysis for TP ICAP Group

TP ICAP Group's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, earnings per share is forecast to rise by 130.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

TP ICAP Group's Dividend Has Lacked Consistency

Looking back, TP ICAP Group's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the dividend has gone from £0.112 total annually to £0.095. Doing the maths, this is a decline of about 3.2% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. TP ICAP Group's earnings per share has shrunk at 13% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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.

TP ICAP Group's Dividend Doesn't Look Great

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for TP ICAP Group you should be aware of, and 1 of them can't be ignored. 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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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.