at Home Group (LON:PETS) Is Paying Out A Larger Dividend Than Last Year

By
Simply Wall St
Published
November 25, 2021
LSE:PETS
Source: Shutterstock

Pets at Home Group Plc's (LON:PETS) dividend will be increasing on the 7th of January to UK£0.043, with investors receiving 72% more than last year. This takes the dividend yield from 1.7% to 2.1%, which shareholders will be pleased with.

Check out our latest analysis for at Home Group

at Home Group's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by at Home 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 rise by 28.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

historic-dividend
LSE:PETS Historic Dividend November 26th 2021

at Home Group Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the first annual payment was UK£0.036, compared to the most recent full-year payment of UK£0.08. This means that it has been growing its distributions at 12% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

at Home Group Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that at Home Group has grown earnings per share at 6.3% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On at Home Group's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for at Home Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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