BT Group (LON:BT.A) Has Announced That It Will Be Increasing Its Dividend To £0.0576
BT Group plc (LON:BT.A) will increase its dividend on the 10th of September to £0.0576, which is 1.2% higher than last year's payment from the same period of £0.0569. This makes the dividend yield about the same as the industry average at 4.1%.
BT Group's Projected Earnings Seem Likely To Cover Future Distributions
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, BT Group was paying out 76% of earnings, but a comparatively small 38% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
Looking forward, earnings per share is forecast to rise by 32.3% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 53% which would be quite comfortable going to take the dividend forward.
Check out our latest analysis for BT Group
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of £0.124 in 2015 to the most recent total annual payment of £0.0816. The dividend has shrunk at around 4.1% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Is Doubtful
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. It's not great to see that BT Group's earnings per share has fallen at approximately 9.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Our Thoughts On BT Group's Dividend
Overall, we always like to see the dividend being raised, but we don't think BT Group will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for BT Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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.