Stock Analysis

Sabre Insurance Group (LON:SBRE) Is Reducing Its Dividend To UK£0.037

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LSE:SBRE
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Sabre Insurance Group plc's (LON:SBRE) dividend is being reduced to UK£0.037 on the 16th of September. This means the annual payment is 6.7% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Sabre Insurance Group

Sabre Insurance Group's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend made up a very large portion of earnings and also represented 94% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Over the next year, EPS is forecast to expand by 4.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
LSE:SBRE Historic Dividend July 30th 2021

Sabre Insurance Group Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from UK£0.14 in 2018 to the most recent annual payment of UK£0.16. This works out to be a compound annual growth rate (CAGR) of approximately 3.6% a year over that time. Sabre Insurance Group hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though Sabre Insurance Group's EPS has declined at around 24% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Sabre Insurance Group that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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