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PSC Insurance Group (ASX:PSI) Is Due To Pay A Dividend Of A$0.075

PSC Insurance Group Limited's (ASX:PSI) investors are due to receive a payment of A$0.075 per share on 12th of October. This payment means that the dividend yield will be 2.3%, which is around the industry average.

See our latest analysis for PSC Insurance Group

PSC Insurance Group Is Paying Out More Than It Is Earning

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, PSC Insurance Group's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Looking forward, EPS could fall by 2.7% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 186%, which could put the dividend in jeopardy if the company's earnings don't improve.

historic-dividend
historic-dividend

PSC Insurance Group Doesn't Have A Long Payment History

PSC Insurance Group's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 7 years was A$0.024 in 2015, and the most recent fiscal year payment was A$0.12. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

PSC Insurance Group May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. It's not great to see that PSC Insurance Group's earnings per share has fallen at approximately 2.7% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for PSC Insurance Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.

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