Allfunds Group (AMS:ALLFG) Is Increasing Its Dividend To €0.131

Allfunds Group plc (AMS:ALLFG) will increase its dividend from last year's comparable payment on the 13th of May to €0.131. This makes the dividend yield about the same as the industry average at 2.7%.

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Allfunds Group's Future Dividend Projections Seem Positive

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Even though Allfunds Group isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 13%, which we would be comfortable to see continuing.

View our latest analysis for Allfunds Group

Allfunds Group Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 3 years was €0.05 in 2022, and the most recent fiscal year payment was €0.131. This means that it has been growing its distributions at 38% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Allfunds Group has seen earnings per share falling at 9.6% 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. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Allfunds Group's payments are rock solid. 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. We don't think Allfunds Group is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Allfunds 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.