Moneysupermarket.com Group (LON:MONY) Is Due To Pay A Dividend Of £0.0861

The board of Moneysupermarket.com Group PLC (LON:MONY) has announced that it will pay a dividend of £0.0861 per share on the 11th of May. This makes the dividend yield 5.1%, which will augment investor returns quite nicely.

View our latest analysis for Moneysupermarket.com Group

Moneysupermarket.com 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. Before this announcement, Moneysupermarket.com Group was paying out 92% of earnings, but a comparatively small 69% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 52.6% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 62% which would be quite comfortable going to take the dividend forward.

Moneysupermarket.com Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was £0.0453, compared to the most recent full-year payment of £0.117. This means that it has been growing its distributions at 10.0% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Moneysupermarket.com Group's EPS has declined at around 2.5% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Moneysupermarket.com Group's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Moneysupermarket.com Group is a great stock to add to your portfolio if income is your focus.

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 Moneysupermarket.com Group that investors should know about before committing capital to this stock. Is Moneysupermarket.com Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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