The Sage Group plc's (LON:SGE) investors are due to receive a payment of £0.0695 per share on 28th of June. Based on this payment, the dividend yield for the company will be 1.8%, which is fairly typical for the industry.
View our latest analysis for Sage Group
Sage Group's Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. The last payment made up 75% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Over the next year, EPS is forecast to expand by 68.1%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 46% which brings it into quite a comfortable range.
Sage Group Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was £0.113, compared to the most recent full-year payment of £0.193. This means that it has been growing its distributions at 5.5% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Dividend Growth May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Unfortunately, Sage Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Sage Group's payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.
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 1 warning sign for Sage 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 yield dividend stocks.
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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.
About LSE:SGE
Sage Group
Provides technology solutions and services for small and medium businesses in the United States, the United Kingdom, France, and internationally.
Reasonable growth potential with proven track record and pays a dividend.
