STV Group's (LON:STVG) Dividend Will Be Increased To £0.039

STV Group plc (LON:STVG) will increase its dividend from last year's comparable payment on the 3rd of November to £0.039. This will take the dividend yield to an attractive 5.0%, providing a nice boost to shareholder returns.

See our latest analysis for STV Group

STV Group's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, STV Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 0.02%. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

STV Group's Dividend Has Lacked Consistency

It's comforting to see that STV Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was £0.0297 in 2013, and the most recent fiscal year payment was £0.146. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that STV Group has grown earnings per share at 10% per year over the past five years. STV Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like STV Group's Dividend

Overall, a dividend increase is always good, and we think that STV Group is a strong income stock thanks to its track record and growing earnings. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for STV Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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