Investec Group's (JSE:INL) Upcoming Dividend Will Be Larger Than Last Year's

Investec Group (JSE:INL) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of September to £4.44. The payment will take the dividend yield to 5.7%, which is in line with the average for the industry.

Check out our latest analysis for Investec Group

Investec Group's Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Investec Group has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Investec Group's last earnings report, the payout ratio is at a decent 47%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 21.9%. Analysts forecast the future payout ratio could be 47% over the same time horizon, which is a number we think the company can maintain.

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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 annual payment during the last 10 years was £0.173 in 2014, and the most recent fiscal year payment was £0.328. This means that it has been growing its distributions at 6.6% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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. Investec Group has seen EPS rising for the last five years, at 12% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Investec Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think Investec Group will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Investec Group that investors need to be conscious of moving forward. Is Investec Group not quite the opportunity you were looking for? Why not check out our selection of top 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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