Microlise Group (LON:SAAS) Will Pay A Dividend Of £0.006

Microlise Group plc (LON:SAAS) has announced that it will pay a dividend of £0.006 per share on the 7th of November. Although the dividend is now higher, the yield is only 1.3%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Microlise Group's stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Microlise Group's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Microlise Group's Could Struggle to Maintain Dividend Payments In The Future

Microlise Group's Future Dividends May Potentially Be At Risk

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Microlise Group is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

EPS is forecast to rise very quickly over the next 12 months. Assuming the dividend continues along recent trends, we could see the payout ratio reach 138%, which is on the unsustainable side.

Check out our latest analysis for Microlise Group

Microlise Group Doesn't Have A Long Payment History

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Microlise Group's EPS has declined at around 96% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Microlise Group's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Microlise Group's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. See if the 4 analysts are forecasting a turnaround in our free collection of analyst estimates here. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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