Bloomsbury Publishing (LON:BMY) Has Announced That It Will Be Increasing Its Dividend To £0.1099

Bloomsbury Publishing Plc (LON:BMY) will increase its dividend from last year's comparable payment on the 23rd of August to £0.1099. Although the dividend is now higher, the yield is only 2.1%, which is below the industry average.

View our latest analysis for Bloomsbury Publishing

Bloomsbury Publishing's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, Bloomsbury Publishing's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 7.2% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 43%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from £0.0564 total annually to £0.147. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Bloomsbury Publishing has been growing its earnings per share at 27% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Bloomsbury Publishing's Dividend

Overall, a dividend increase is always good, and we think that Bloomsbury Publishing is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Bloomsbury Publishing that investors should know about before committing capital to this stock. Is Bloomsbury Publishing not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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