Phoenix Group Holdings' (LON:PHNX) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Phoenix Group Holdings plc (LON:PHNX) has announced that it will be increasing its dividend on the 9th of May to UK£0.25. This makes the dividend yield 7.6%, which is above the industry average.

Check out our latest analysis for Phoenix Group Holdings

Phoenix Group Holdings' Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. Even in the absence of profits, Phoenix Group Holdings is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Looking forward, earnings per share could rise by 8.3% over the next year if the trend from the last few years continues. This is the right direction to be moving, but it is probably not enough to achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Phoenix Group Holdings 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£0.42 in 2012, and the most recent fiscal year payment was UK£0.50. This works out to be a compound annual growth rate (CAGR) of approximately 1.7% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

We Could See Phoenix Group Holdings' Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Phoenix Group Holdings has been growing its earnings per share at 8.3% a year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Phoenix Group Holdings will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Phoenix Group Holdings that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.