Stock Analysis

Investec Group (JSE:INL) Will Pay A Dividend Of £3.52

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The board of Investec Group (JSE:INL) has announced that it will pay a dividend on the 22nd of December, with investors receiving £3.52 per share. This makes the dividend yield about the same as the industry average at 6.4%.

Check out our latest analysis for Investec Group

Investec Group Will Pay Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Investec Group has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Investec Group's payout ratio of 46% is a good sign as this means that earnings decently cover dividends.

EPS is set to grow by 6.0% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could reach 1,058%, which probably can't continue without starting to put some pressure on the balance sheet.

JSE:INL Historic Dividend December 4th 2023

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from £0.162 total annually to £0.326. This means that it has been growing its distributions at 7.3% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Investec Group has grown earnings per share at 6.0% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

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. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Investec Group (of which 1 can't be ignored!) you should know about. 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.