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Does PageGroup plc (LON:PAGE) Have A Place In Your Portfolio?

There is a lot to be liked about PageGroup plc (LON:PAGE) as an income stock. It has paid dividends over the past 10 years. The company is currently worth UK£1.4b, and now yields roughly 5.8%. Let’s dig deeper into whether PageGroup should have a place in your portfolio.

See our latest analysis for PageGroup

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

  • Is it paying an annual yield above 75% of dividend payers?

  • Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

  • Has dividend per share risen in the past couple of years?

  • Can it afford to pay the current rate of dividends from its earnings?

  • Will it be able to continue to payout at the current rate in the future?

LSE:PAGE Historical Dividend Yield, March 9th 2019
LSE:PAGE Historical Dividend Yield, March 9th 2019

How does PageGroup fare?

The current trailing twelve-month payout ratio for the stock is 40%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect PAGE’s payout to increase to 45% of its earnings. Assuming a constant share price, this equates to a dividend yield of 5.7%. In addition to this, EPS should increase to £0.36. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

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When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. In the case of PAGE it has increased its DPS from £0.080 to £0.26 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.

Relative to peers, PageGroup produces a yield of 5.8%, which is high for Professional Services stocks.

Next Steps:

With this in mind, I definitely rank PageGroup as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three relevant factors you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for PAGE’s future growth? Take a look at our free research report of analyst consensus for PAGE’s outlook.

  2. Valuation: What is PAGE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether PAGE is currently mispriced by the market.

  3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.