The board of Investec Group (JSE:INL) has announced that it will pay a dividend on the 22nd of December, with investors receiving ￡3.52 per share. Based on this payment, the dividend yield for the company will be 6.4%, which is fairly typical for the industry.

See our latest analysis for Investec Group

Investec Group Not Expected To Earn Enough To Cover Its Payments

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Investec Group has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 46%, which means that Investec Group would be able to pay its last dividend without pressure on the balance sheet.

Earnings per share could rise by 6.0% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the future payout ratio could reach 1,058%, which probably can't continue without starting to put some pressure on the balance sheet.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ￡0.162 in 2013, and the most recent fiscal year payment was ￡0.326. This implies that the company grew its distributions at a yearly rate of about 7.3% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Investec Group Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Investec Group has seen EPS rising for the last five years, at 6.0% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Investec Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Investec Group's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Investec Group has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 2 warning signs for Investec Group (1 can'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.

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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.