Strix Group (LON:KETL) Is Paying Out A Dividend Of £0.0275

The board of Strix Group Plc (LON:KETL) has announced that it will pay a dividend of £0.0275 per share on the 28th of October. This means the annual payment is 7.2% of the current stock price, which is above the average for the industry.

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. Strix Group's stock price has reduced by 32% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for Strix Group

Strix Group's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Strix Group was paying out a very large proportion of what it was earning and 237% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 55.0%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 60% which brings it into quite a comfortable range.

Strix Group's Dividend Has Lacked Consistency

It's comforting to see that Strix Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of £0.07 in 2017 to the most recent total annual payment of £0.0835. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. In the last three years, Strix Group's earnings per share has shrunk at approximately 4.3% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Strix Group's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Strix Group that you should be aware of before investing. Is Strix Group not quite the opportunity you were looking for? Why not check out our selection of top 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.