The Sage Group plc (LON:SGE) has announced that it will be increasing its periodic dividend on the 11th of February to £0.135, which will be 5.9% higher than last year’s comparable payment amount of £0.128. The payment will take the dividend yield to 1.6%, which is in line with the average for the industry.
View our latest analysis for Sage Group
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Sage Group was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Over the next year, EPS is forecast to expand by 57.6%. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from £0.121 total annually to £0.205. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Investors could be attracted to the stock based on the quality of its payment history. Sage Group has impressed us by growing EPS at 5.8% 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.
Overall, a dividend increase is always good, and we think that Sage Group is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend 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. For instance, we’ve picked out 2 warning signs for Sage Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
