NCC Group's (LON:NCC) Dividend Will Be UK£0.015

The board of NCC Group plc (LON:NCC) has announced that it will pay a dividend of UK£0.015 per share on the 4th of March. This payment means that the dividend yield will be 2.3%, which is around the industry average.

See our latest analysis for NCC Group

NCC Group's Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, NCC Group's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS is forecast to expand by 170.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

NCC Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from UK£0.022 in 2012 to the most recent annual payment of UK£0.046. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. NCC Group has seen EPS rising for the last five years, at 9.8% per annum. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

We'd also point out that NCC Group has issued stock equal to 10% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On NCC Group's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 4 warning signs for NCC Group that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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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.