EBOS Group (NZSE:EBO) Will Pay A Dividend Of A$0.5951

EBOS Group Limited (NZSE:EBO) has announced that it will pay a dividend of A$0.5951 per share on the 22nd of March. This will take the annual payment to 3.1% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for EBOS Group

EBOS Group's Payment Has Solid Earnings Coverage

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, EBOS Group was paying out a very large proportion of what it was earning and 99% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 21.2%. If the dividend continues along recent trends, we estimate the payout ratio could reach 81%, which is on the higher side, but certainly still feasible.

EBOS Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was A$0.276 in 2014, and the most recent fiscal year payment was A$1.06. This means that it has been growing its distributions at 14% per annum 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. We are encouraged to see that EBOS Group has grown earnings per share at 8.7% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think EBOS Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for EBOS Group that you should be aware of before investing. 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.