Property Franchise Group (LON:TPFG) Is Increasing Its Dividend To UK£0.038

The Property Franchise Group PLC's (LON:TPFG) dividend will be increasing to UK£0.038 on 8th of October. This takes the dividend yield from 3.5% to 3.5%, which shareholders will be pleased with.

See our latest analysis for Property Franchise Group

Property Franchise 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. The last dividend was quite easily covered by Property Franchise Group's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 0.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 68%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Property Franchise Group's Dividend Has Lacked Consistency

Looking back, Property Franchise Group's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2014, the dividend has gone from UK£0.026 to UK£0.10. This means that it has been growing its distributions at 22% per annum over that time. Property Franchise Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Property Franchise Group's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Property Franchise Group has seen EPS rising for the last five years, at 7.6% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

The company has also been raising capital by issuing stock equal to 24% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On Property Franchise Group's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Taking the debate a bit further, we've identified 2 warning signs for Property Franchise Group that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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