EMIS Group (LON:EMIS) Has Announced That It Will Be Increasing Its Dividend To UK£0.18

EMIS Group plc's (LON:EMIS) dividend will be increasing to UK£0.18 on 17th of May. This will take the dividend yield from 2.7% to 2.7%, providing a nice boost to shareholder returns.

View our latest analysis for EMIS Group

EMIS Group's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, EMIS Group was paying out 76% of earnings, but a comparatively small 61% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 8.7%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 76%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

EMIS Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was UK£0.11 in 2012, and the most recent fiscal year payment was UK£0.35. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See EMIS Group's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that EMIS Group has grown earnings per share at 8.7% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With a reasonable track record and good earnings coverage, the payments look sustainable. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for EMIS Group for free with public analyst estimates for the company. Is EMIS 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.