Advertisement
Australia markets closed
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • AUD/USD

    0.6506
    -0.0030 (-0.46%)
     
  • OIL

    82.42
    +1.07 (+1.32%)
     
  • GOLD

    2,233.80
    +21.10 (+0.95%)
     
  • Bitcoin AUD

    109,231.29
    -651.71 (-0.59%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • AUD/EUR

    0.6018
    -0.0013 (-0.21%)
     
  • AUD/NZD

    1.0891
    +0.0011 (+0.10%)
     
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NASDAQ

    18,261.65
    -19.19 (-0.10%)
     
  • FTSE

    7,956.09
    +24.11 (+0.30%)
     
  • Dow Jones

    39,817.01
    +56.93 (+0.14%)
     
  • DAX

    18,496.55
    +19.46 (+0.11%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     

EBOS Group (NZSE:EBO) Is Increasing Its Dividend To NZ$0.49

EBOS Group Limited (NZSE:EBO) will increase its dividend on the 18th of March to NZ$0.49. Based on the announced payment, the dividend yield for the company will be 2.4%, which is fairly typical for the industry.

Check out our latest analysis for EBOS Group

EBOS Group's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend made up a very large portion of earnings and also represented 87% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

ADVERTISEMENT

EPS is set to grow by 17.5% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 88% which is a bit high but can definitely be sustainable.

historic-dividend
historic-dividend

EBOS Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from AU$0.23 to AU$0.88. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 4.2% per annum over the last five years, which admittedly is a bit slow. Slow growth and a high payout ratio could mean that EBOS Group has maxed out the amount that it has been able to pay to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

We'd also point out that EBOS Group has issued stock equal to 15% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for EBOS Group that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.