The board of BT Group plc (LON:BT.A) has announced an increase in the dividend payment on 11th of September to £0.0569, which is 5.6% higher than last year’s payment of £0.0539 for the same period. This brings the dividend yield to 6.1%, a figure that shareholders will be pleased with.
Prior to this announcement, BT Group was paying out 92% of earnings and over 75% of free cash flows. While this indicates a focus on returning cash to shareholders rather than growing the business, there are no immediate signs that the dividend might be unsustainable. With forecasted EPS growth of 56.8% over the next year, the payout ratio is estimated to be a comfortable 56%.
The company has a long dividend track record, but there have been cuts in the past. Since 2014, the dividend has decreased from £0.095 annually to £0.08, reflecting a decline of approximately 1.7% per year. Declining dividends can raise concerns about the company facing challenges.
Earnings per share have been decreasing by 17% over the last five years, which could impact dividend payments if the trend continues. While earnings are predicted to rise in the next 12 months, caution is advised until this becomes a consistent trend.
Overall, while it is positive to see the dividend being raised, BT Group may not be the best income stock due to the high payments and inconsistent track record. Investors looking for income investments may want to explore other options. Consistent dividend policies can boost investor confidence, but other factors should also be considered when analyzing a company.
It’s important to conduct a comprehensive analysis before making investment decisions. Simply Wall St provides fair value estimates, risks and warnings, dividends, insider transactions, and financial health assessments to help investors evaluate potential opportunities. Feedback on articles can be directed to the editorial team for further assistance. Note that Simply Wall St’s articles are based on historical data and analyst forecasts, and are not intended as financial advice.