Dalata Hotel Group (ISE:DHG) Is Due To Pay A Dividend Of €0.041

Dalata Hotel Group plc (ISE:DHG) has announced that it will pay a dividend of €0.041 per share on the 4th of October. This will take the annual payment to 3.0% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Dalata Hotel Group

Dalata Hotel Group's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Dalata Hotel Group's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 30.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dalata Hotel Group's Dividend Has Lacked Consistency

Dalata Hotel 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 6 years was €0.06 in 2018, and the most recent fiscal year payment was €0.12. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dalata Hotel Group May Find It Hard To Grow The Dividend

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. Dalata Hotel Group has seen earnings per share falling at 2.3% per year over the last five years. 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. 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 Dalata Hotel Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Dalata Hotel Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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