Property Franchise Group's (LON:TPFG) Upcoming Dividend Will Be Larger Than Last Year's
Simply Wall St · 09/15 05:01

The Property Franchise Group PLC (LON:TPFG) has announced that it will be increasing its periodic dividend on the 6th of October to £0.046, which will be 9.5% higher than last year's comparable payment amount of £0.042. This takes the annual payment to 4.5% of the current stock price, which is about average for the industry.

View our latest analysis for Property Franchise Group

Property Franchise Group's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Property Franchise Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 4.1%. If the dividend continues along recent trends, we estimate the payout ratio could be 69%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

AIM:TPFG Historic Dividend September 15th 2023

Property Franchise Group's Dividend Has Lacked Consistency

Looking back, Property Franchise Group's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was £0.026 in 2014, and the most recent fiscal year payment was £0.13. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. Property Franchise Group has impressed us by growing EPS at 12% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Property Franchise Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Property Franchise Group (of which 1 is a bit concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.