Yahoo Finance Volution Group (LON:FAN) Is Increasing Its Dividend To £0.05
The board of Volution Group plc (LON:FAN) has announced that the dividend on 20th of December will be increased to £0.05, which will be 14% higher than last year's payment of £0.044 which covered the same period. Although the dividend is now higher, the yield is only 2.4%, which is below the industry average.
See our latest analysis for Volution Group
Volution Group's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Volution Group's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to fall by 4.9%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 46%, which is comfortable for the company to continue in the future.
Volution Group's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The annual payment during the last 8 years was £0.021 in 2014, and the most recent fiscal year payment was £0.073. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Looks Likely To Grow
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. Volution Group has seen EPS rising for the last five years, at 21% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Volution Group could prove to be a strong dividend payer.
Volution Group Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Volution Group (1 is concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
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