Phoenix Group Holdings (LON:PHNX) Is Increasing Its Dividend To UK£0.24

The board of Phoenix Group Holdings plc (LON:PHNX) has announced that it will be increasing its dividend by 3.0% on the 3rd of September to UK£0.24. This takes the dividend yield from 7.3% to 7.3%, which shareholders will be pleased with.

See our latest analysis for Phoenix Group Holdings

Phoenix Group Holdings Might Find It Hard To Continue The Dividend

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Phoenix Group Holdings is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share could rise by 28.4% over the next year if the trend from the last few years continues. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.

Phoenix Group Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from UK£0.42 in 2011 to the most recent annual payment of UK£0.48. This means that it has been growing its distributions at 1.4% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Company Could Face Some Challenges Growing The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Phoenix Group Holdings has grown earnings per share at 28% per year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

Our Thoughts On Phoenix Group Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Phoenix Group Holdings' payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Phoenix Group Holdings that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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