Warner Music Group (NASDAQ:WMG) Has Announced A Dividend Of $0.18

Warner Music Group Corp. (NASDAQ:WMG) will pay a dividend of $0.18 on the 4th of March. Based on this payment, the dividend yield on the company's stock will be 2.0%, which is an attractive boost to shareholder returns.

View our latest analysis for Warner Music Group

Warner Music Group's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 75% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 72.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

Warner Music Group Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 5 years was $0.48 in 2020, and the most recent fiscal year payment was $0.72. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Warner Music Group to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Warner Music Group has been growing its earnings per share at 11% a year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

We Really Like Warner Music Group's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for Warner Music Group that you should be aware of before investing. Is Warner Music 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.