EJF Investments Limited (LON:EJFI) will pay a dividend of £0.0268 on the 31st of August. Based on this payment, the dividend yield on the company's stock will be 9.9%, which is an attractive boost to shareholder returns.
See our latest analysis for EJF Investments
EJF Investments' Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, EJF Investments' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Unless the company can turn things around, EPS could fall by 3.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 49%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
EJF Investments Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of £0.096 in 2017 to the most recent total annual payment of £0.107. This implies that the company grew its distributions at a yearly rate of about 1.8% over that duration. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
EJF Investments May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though EJF Investments' EPS has declined at around 3.0% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
Our Thoughts On EJF Investments' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for EJF Investments (1 shouldn't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.