News
Burberry Group (LON:BRBY) announced a dividend of £0.427
Burberry plc group (LON: BRBY) will pay a dividend of £0.427 on August 2nd. This means the annual payout is 5.7% of the current share price, which is above the industry average.
See our latest analysis for Burberry Group
Burberry Group’s dividends are well covered by profits
A big dividend yield over a few years doesn’t mean much if it can’t be sustained. Before this announcement, Burberry Group’s dividends represented a large proportion of profits but only 73% of free cash flows. In general, cash flows are more important than profits, so we’re confident the dividend will be sustainable in the future, especially with so much money left over for reinvestment.
Next year, EPS is expected to grow 17.4%. Assuming the dividend will continue in line with recent trends, we think the payout ratio could be 72%, which would be quite comfortable to take the dividend forward.
historic dividend
Dividend Volatility
Although the company has a long history of dividends, they have been cut at least once in the last 10 years. The dividend has gone from an annual total of £0.29 in 2014 to the most recent total annual payment of £0.61. This implies that the company increased its distributions at an annual rate of about 7.7% during that period. It’s good to see a reasonable rate of dividend growth, but we’re concerned that the dividend track record isn’t as solid as we’d like, having been cut at least once.
Dividend growth prospects are limited
Rising earnings per share can be a mitigating factor when considering past fluctuations in dividends. Burberry Group hasn’t seen much change in its earnings per share over the past five years.
In short
Overall, it’s not good to see that the dividends have been cut, but this could be explained by the fact that payments were a bit high previously. In the past, payments have been unstable, but in the short term dividends could be reliable, with the company generating enough cash to cover them. Overall, we don’t think this company has the ingredients for a good earnings stock.
Market movements attest to how much a consistent dividend policy is valued compared to a more unpredictable one. However, despite the importance of dividend payments, these are not the only factors our readers should know when evaluating a company. For example, we choose 2 warning signs for the Burberry Group that investors should be aware of before committing capital to these stocks. Is Burberry Group not exactly the opportunity you were looking for? Why not check out our selection of the main dividend stocks.
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