Investec Group (JSE:INL) Is Paying Out A Larger Dividend Than Last Year

Investec Group (JSE:INL) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of September to £4.44. The payment will take the dividend yield to 5.7%, which is in line with the average for the industry.

See our latest analysis for Investec Group

Investec Group's Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, Investec Group has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Investec Group's payout ratio of 47% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 21.9% over the next 3 years. Analysts estimate the future payout ratio will be 47% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £0.173 in 2014, and the most recent fiscal year payment was £0.328. This works out to be a compound annual growth rate (CAGR) of approximately 6.6% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Investec Group has been growing its earnings per share at 12% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Investec Group's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Investec Group that you should be aware of before investing. Is Investec Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com