Next Fifteen Communications Group plc (LON:NFC) will increase its dividend on the 12th of August to UK£0.084. Despite this raise, the dividend yield of 0.9% is only a modest boost to shareholder returns.
See our latest analysis for Next Fifteen Communications Group
Next Fifteen Communications Group Might Find It Hard To Continue The Dividend
Even a low dividend yield can be attractive if it is sustained for years on end. Even though Next Fifteen Communications Group isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.
Looking forward, earnings per share could 69.8% over the next year if the trend of the last few years can't be broken. This means that the company won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was UK£0.021, compared to the most recent full-year payment of UK£0.17. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Next Fifteen Communications Group's EPS has fallen by approximately 70% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
Next Fifteen Communications Group's Dividend Doesn't Look Sustainable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.
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 instance, we've picked out 1 warning sign for Next Fifteen Communications Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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