PSG Konsult Limited (JSE:KST) has announced that it will be increasing its dividend on the 2nd of November to R0.10. Despite this raise, the dividend yield of 1.9% is only a modest boost to shareholder returns.
PSG Konsult's Earnings Easily Cover the Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. The last dividend was quite easily covered by PSG Konsult's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share could rise by 18.7% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.
PSG Konsult Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The first annual payment during the last 7 years was R0.08 in 2014, and the most recent fiscal year payment was R0.27. This means that it has been growing its distributions at 19% per annum over that time. PSG Konsult has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that PSG Konsult has grown earnings per share at 19% per 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.
We Really Like PSG Konsult's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Now, if you want to look closer, it would be worth checking out our free research on PSG Konsult management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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.
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