Yahoo Finance Admiral Group (LON:ADM) Is Paying Out Less In Dividends Than Last Year
Admiral Group plc (LON:ADM) has announced that on 2nd of June, it will be paying a dividend of£0.52, which a reduction from last year's comparable dividend. The dividend yield will be in the average range for the industry at 5.4%.
Check out our latest analysis for Admiral Group
Admiral Group Doesn't Earn Enough To Cover Its Payments
We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite comfortably covered by Admiral Group's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.
Earnings per share is forecast to rise by 21.1% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 114% over the next year.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from £0.906 total annually to £1.12. This implies that the company grew its distributions at a yearly rate of about 2.1% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Dividend's Growth Prospects Are Limited
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. Admiral Group hasn't seen much change in its earnings per share over the last five years. The company has been growing at a pretty soft 1.3% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Our Thoughts On Admiral Group's Dividend
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Admiral Group has been making. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Admiral Group that investors should know about before committing capital to this stock. 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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