Sabre Insurance Group's (LON:SBRE) Dividend Is Being Reduced To £0.017
Sabre Insurance Group plc (LON:SBRE) is reducing its dividend from last year's comparable payment to £0.017 on the 1st of June. The dividend yield will be in the average range for the industry at 4.4%.
See our latest analysis for Sabre Insurance Group
Sabre Insurance Group's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Sabre Insurance Group's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 19%, which is in a comfortable range for us.
Sabre Insurance Group's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2018, the dividend has gone from £0.144 total annually to £0.045. This works out to a decline of approximately 69% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Sabre Insurance Group's earnings per share has shrunk at 22% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
The Dividend Could Prove To Be Unreliable
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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. We don't think Sabre Insurance Group is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Sabre Insurance Group that investors should know about before committing capital to this stock. Is Sabre Insurance 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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