Kainos Group (LON:KNOS) Is Due To Pay A Dividend Of £0.093

The board of Kainos Group plc (LON:KNOS) has announced that it will pay a dividend on the 13th of December, with investors receiving £0.093 per share. This will take the dividend yield to an attractive 3.1%, providing a nice boost to shareholder returns.

View our latest analysis for Kainos Group

Kainos Group's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Kainos 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.

The next year is set to see EPS grow by 4.0%. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

Kainos Group's Dividend Has Lacked Consistency

Looking back, Kainos Group's dividend hasn't been particularly consistent. 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 £0.036 in 2015 to the most recent total annual payment of £0.273. This means that it has been growing its distributions at 25% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Kainos Group has grown earnings per share at 20% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Kainos Group could prove to be a strong dividend payer.

We Really Like Kainos Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Kainos Group that investors need to be conscious of moving forward. Is Kainos Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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