AIB Group (ISE:A5G) Is Paying Out A Larger Dividend Than Last Year

The board of AIB Group plc (ISE:A5G) has announced that it will be paying its dividend of €0.062 on the 12th of May, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 1.6% is only a modest boost to shareholder returns.

Check out our latest analysis for AIB Group

AIB Group's Payment Expected To Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having paid out dividends for 5 years, AIB Group has a good history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, AIB Group's latest earnings report puts its payout ratio at 24%, showing that the company can pay out its dividends comfortably.

Looking forward, EPS is forecast to rise by 94.5% over the next 3 years. The future payout ratio could be 72% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

AIB Group's Dividend Has Lacked Consistency

AIB Group has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 5 years was €0.12 in 2018, and the most recent fiscal year payment was €0.062. Dividend payments have fallen sharply, down 48% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Come By

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though AIB Group's EPS has declined at around 7.9% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On AIB Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think AIB Group's payments are rock solid. While AIB Group is earning enough to cover the dividend, we are generally unimpressed with its future prospects. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for AIB Group that investors should take into consideration. Is AIB 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.