PSG FINANCIAL SERVICES LIMITED. (JSE:KST)'s dividend will increase to R0.285 on 13 May from the same period last year paid. Even though the dividend has increased, the yield is still quite low at 2.6%.
Check out our latest analysis for PSG Financial Services.
PSG Financial Services payments cover guaranteed income
It's good to see a high yield, but you also need to see if the higher dividend level is sustainable. The last dividend was more than covered by the profits from his PSG Financial Services, but cash flow was a bit tight. Although the business is profitable enough to pay dividends, the cash payout ratio of 94% suggests that the company is focusing more on returning cash to shareholders than on business growth.
If recent trends continue, EPS could expand by 12.4% over the next 12 months. If dividends continue in line with recent trends, the dividend payout ratio is expected to be 52%, which is within a range that is fully satisfactory in terms of dividend sustainability.
PSG Financial Services has a proven track record
Even with a long history of dividends, the company's dividends have been extremely stable. Since 2014, dividends have gone from a total of R0.08 to R0.385 per year. This works out to be a compound annual growth rate (CAGR) of approximately 17% over that period. Rapid dividend growth over time is an invaluable feature for income stocks.
Dividends are likely to grow further
Some investors may be chomping at the bit to buy the company's stock based on its dividend history. PSG Financial Services has seen its EPS grow at 12% per year over the past five years. Shareholders are getting a good deal of their profits back, and combined with strong growth, this makes it very attractive.
In summary
In summary, it's great to see the company able to raise its dividend and keep it within a sustainable range. However, the lack of cash flow makes us wary that future dividends could be cut, even if they look okay overall. The dividend seems to be okay, but there have been problems in the past, so I'd be a little cautious.
Market movements prove how highly valued a consistent dividend policy is compared to a more unpredictable dividend policy. However, there are other things investors should consider when analyzing stock performance. Is management helping themselves to achieve business results? Find out their shareholding in PSG Financial Services with our latest insider ownership analysis. If you are a dividend investor, check out this article as well. A carefully selected list of high dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
