Why It Might Not Make Sense To Buy Portmeirion Group PLC (LON:PMP) For Its Upcoming Dividend

Portmeirion Group PLC (LON:PMP) is set to trade ex-dividend in the next few days, with the ex-dividend date falling on November 14, 2024. The company has declared a dividend of £0.015 per share, which will be paid on December 13, 2024. However, investors should be cautious about buying Portmeirion Group for its upcoming dividend, as several factors suggest that it might not be the most attractive option.
Firstly, Portmeirion Group's financial performance has been volatile, impacting its ability to maintain its dividend. The company reported a loss last year, and its earnings have been declining, making it difficult to analyze and own safely. Despite this, the dividend was well-covered by free cash flow, with the company paying out 16% of its cash flow last year. However, the dividend payments per share have declined at 19% per year on average over the past 10 years, which is uninspiring.
Secondly, Portmeirion Group's dividend policy has been inconsistent, with declining dividends over the past decade. The company has paid a dividend despite reporting a loss last year, raising concerns about its sustainability. The dividend yield is lower than the average for Consumer Cyclical companies, making it less attractive for income-focused investors.
Thirdly, Portmeirion Group's dividend compares unfavorably to its peers in the consumer goods sector. According to MarketBeat, the average dividend yield for consumer goods companies is 2.23%, higher than Portmeirion Group's 1.35%. Additionally, Portmeirion Group's payout ratio is -500.00% based on trailing earnings, indicating that the company is paying out more in dividends than it earns, which is unsustainable in the long term. Furthermore, Portmeirion Group reported a loss last year, making it difficult to sustain its dividend payments.
Fourthly, the potential risks and opportunities for investors considering Portmeirion Group's dividend should be carefully weighed. While the upcoming dividend may seem attractive, the company's financial performance and dividend history raise concerns about its sustainability. Investors should consider other dividend stocks with more stable earnings and dividend growth.
In conclusion, while Portmeirion Group's upcoming dividend may seem attractive, several factors suggest that it might not be the most sensible investment. The company's volatile financial performance, inconsistent dividend policy, unfavorable comparison to peers, and potential risks should give investors pause. Instead, investors may want to consider other dividend stocks with more stable earnings and dividend growth, or explore other income-focused investment options, such as utilities, renewable energy, or REITs. By doing so, investors can secure steady returns and protect their portfolios from potential risks.