Euromoney Institutional Investor's (LON:ERM) Dividend Will Be Increased To UK£0.13

Euromoney Institutional Investor PLC (LON:ERM) has announced that it will be increasing its dividend on the 15th of February to UK£0.13. The announced payment will take the dividend yield to 1.8%, which is in line with the average for the industry.

View our latest analysis for Euromoney Institutional Investor

Euromoney Institutional Investor's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, the company was paying out 156% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 20%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next year is set to see EPS grow by 159.3%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 58% which would be quite comfortable going to take the dividend forward.

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Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the first annual payment was UK£0.19, compared to the most recent full-year payment of UK£0.11. This works out to be a decline of approximately 4.9% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Euromoney Institutional Investor has seen earnings per share falling at 7.7% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Euromoney Institutional Investor's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Euromoney Institutional Investor's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Euromoney Institutional Investor that investors should take into consideration. 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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