STV Group (LON:STVG) Has Announced That It Will Be Increasing Its Dividend To £0.074

STV Group plc (LON:STVG) has announced that it will be increasing its periodic dividend on the 26th of May to £0.074, which will be 1.4% higher than last year's comparable payment amount of £0.073. This makes the dividend yield 4.0%, which is above the industry average.

View our latest analysis for STV Group

STV Group's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. STV Group is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 5.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

STV Group's Dividend Has Lacked Consistency

Looking back, STV Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2014, the annual payment back then was £0.0297, compared to the most recent full-year payment of £0.113. This means that it has been growing its distributions at 16% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 4.6% per annum over the last five years, which admittedly is a bit slow. If STV Group is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On STV Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While STV Group is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. Just as an example, we've come across 3 warning signs for STV Group you should be aware of, and 2 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.