EBOS Group (NZSE:EBO) Will Pay A Larger Dividend Than Last Year At A$0.5116

EBOS Group Limited's (NZSE:EBO) dividend will be increasing from last year's payment of the same period to A$0.5116 on 30th of September. This takes the annual payment to 2.6% of the current stock price, which is about average for the industry.

Check out our latest analysis for EBOS Group

EBOS Group's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, EBOS Group was paying out quite a large proportion of both earnings and cash flow, with the dividend being 106% 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.

The next year is set to see EPS grow by 54.3%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend forward.

EBOS Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the dividend has gone from A$0.232 total annually to A$0.886. This means that it has been growing its distributions at 14% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See EBOS Group's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that EBOS Group has been growing its earnings per share at 5.0% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

We should note that EBOS Group has issued stock equal to 15% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

EBOS Group's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think EBOS Group's payments are rock solid. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for EBOS Group that investors should take into consideration. Is EBOS 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.