Property Franchise Group (LON:TPFG) Is Increasing Its Dividend To £0.088

The Property Franchise Group PLC (LON:TPFG) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of June to £0.088. This takes the annual payment to 4.7% of the current stock price, which is about average for the industry.

View our latest analysis for Property Franchise Group

Property Franchise Group's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Property Franchise Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to fall by 1.1% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 64%, which is comfortable for the company to continue in the future.

Property Franchise Group's Dividend Has Lacked Consistency

It's comforting to see that Property Franchise 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 dividend has gone from an annual total of £0.026 in 2014 to the most recent total annual payment of £0.13. This implies that the company grew its distributions at a yearly rate of about 20% 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.

We Could See Property Franchise Group's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Property Franchise Group has been growing its earnings per share at 9.6% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Property Franchise Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Property Franchise Group is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Just as an example, we've come across 2 warning signs for Property Franchise Group you should be aware of, and 1 of them is a bit concerning. 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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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.