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

EMIS Group plc (LON:EMIS) has announced that it will be increasing its dividend on the 4th of November to UK£0.18. This will take the annual payment to 2.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for EMIS Group

EMIS 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. Prior to this announcement, EMIS Group was paying out 73% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Looking forward, earnings per share is forecast to rise by 7.7% over the next year. If the dividend continues on this path, the payout ratio could be 74% by next year, which we think can be pretty sustainable going forward.

EMIS Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was UK£0.11 in 2011, and the most recent fiscal year payment was UK£0.35. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. EMIS Group has impressed us by growing EPS at 53% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which EMIS Group hasn't been doing.

Our Thoughts On EMIS Group's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 EMIS Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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