Moneysupermarket.com Group (LON:MONY) Is Paying Out A Dividend Of £0.031

The board of Moneysupermarket.com Group PLC (LON:MONY) has announced that it will pay a dividend on the 2nd of September, with investors receiving £0.031 per share. The dividend yield will be 5.3% based on this payment which is still above the industry average.

See our latest analysis for Moneysupermarket.com Group

Moneysupermarket.com Group's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 109% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Looking forward, earnings per share is forecast to rise by 62.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 70%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Moneysupermarket.com Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of £0.0453 in 2012 to the most recent total annual payment of £0.117. This means that it has been growing its distributions at 10.0% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Moneysupermarket.com Group's earnings per share has shrunk at approximately 5.0% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Moneysupermarket.com Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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