Rightmove (LON:RMV) Is Increasing Its Dividend To UK£0.048

Rightmove plc (LON:RMV) has announced that it will be increasing its dividend on the 27th of May to UK£0.048. This makes the dividend yield 1.3%, which is above the industry average.

See our latest analysis for Rightmove

Rightmove'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. However, prior to this announcement, Rightmove's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 9.7% over the next year. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was UK£0.016 in 2012, and the most recent fiscal year payment was UK£0.096. This works out to be a compound annual growth rate (CAGR) of approximately 20% 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.

Rightmove Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Rightmove has seen EPS rising for the last five years, at 9.6% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Rightmove Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 20 analysts we track are forecasting for Rightmove for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.