discoverIE Group (LON:DSCV) Will Pay A Larger Dividend Than Last Year At UK£0.034




  • In Business
  • 2021-12-05 06:28:12Z
  • By Simply Wall St.
 

The board of discoverIE Group plc (LON:DSCV) has announced that it will be increasing its dividend by 6.3% on the 14th of January to UK£0.034. Even though the dividend went up, the yield is still quite low at only 1.1%.

View our latest analysis for discoverIE Group

discoverIE Group's Earnings Easily Cover the Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, discoverIE Group's dividend made up quite a large proportion of earnings but only 31% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 53.7% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 56% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the dividend has gone from UK£0.075 to UK£0.10. This means that it has been growing its distributions at 3.3% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

discoverIE Group Could Grow Its Dividend

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. discoverIE Group has seen EPS rising for the last five years, at 9.8% per annum. 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.

Our Thoughts On discoverIE Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think discoverIE Group will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for discoverIE Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

COMMENTS

More Related News

3 Sales & Earnings Growth Winners
3 Sales & Earnings Growth Winners

3 Sales and Earnings Growth Winners

Those who invested in Big River Industries (ASX:BRI) a year ago are up 63%
Those who invested in Big River Industries (ASX:BRI) a year ago are up 63%

The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you...

Integra LifeSciences Holdings (NASDAQ:IART) jumps 4.4% this week, though earnings growth is still tracking behind five-year shareholder returns
Integra LifeSciences Holdings (NASDAQ:IART) jumps 4.4% this week, though earnings growth is still tracking behind five-year shareholder returns

The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share...

Investors in ImmunoPrecise Antibodies (CVE:IPA) have made a impressive return of 113% over the past three years
Investors in ImmunoPrecise Antibodies (CVE:IPA) have made a impressive return of 113% over the past three years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can...

Is Acuity Brands, Inc.
Is Acuity Brands, Inc.'s (NYSE:AYI) Recent Stock Performance Influenced By Its Financials In Any Way?

Most readers would already know that Acuity Brands' (NYSE:AYI) stock increased by 4.3% over the past month. As most...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business