3i Group (LON:III) Is Increasing Its Dividend To £0.425
The board of 3i Group plc (LON:III) has announced that it will be paying its dividend of £0.425 on the 25th of July, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.8%, which is below the industry average.
3i Group's Payment Could Potentially Have Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, based ont he last payment, 3i Group was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.
Over the next year, EPS is forecast to expand by 61.7%. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.
See our latest analysis for 3i Group
3i Group Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of £0.081 in 2015 to the most recent total annual payment of £0.73. This means that it has been growing its distributions at 25% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that 3i Group has grown earnings per share at 88% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for 3i Group for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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