EBOS Group (NZSE:EBO) Is Paying Out A Larger Dividend Than Last Year

EBOS Group Limited's (NZSE:EBO) dividend will be increasing from last year's payment of the same period to A$0.5534 on 17th of March. Even though the dividend went up, the yield is still quite low at only 2.3%.

See our latest analysis for EBOS Group

EBOS Group's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, EBOS Group was paying out 75% of earnings and more than 75% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

The next year is set to see EPS grow by 36.9%. If the dividend continues on this path, the payout ratio could be 69% by next year, which we think can be pretty sustainable going forward.

EBOS Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was A$0.256 in 2013, and the most recent fiscal year payment was A$0.968. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

We Could See EBOS Group's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. EBOS Group has seen EPS rising for the last five years, at 7.6% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

Overall, we always like to see the dividend being raised, but we don't think EBOS Group will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments EBOS Group has been making. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 10 EBOS Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.