Inspired Plc Increases Dividend – A Step to Reassure Investors?

The board of Inspired has announced a dividend payout of £0.0145 per share on December 13th, corresponding to a dividend yield of 5.5%, which is likely to please shareholders. Despite the attractive dividend yield, investors should also consider potential stock price movements, as these can generally exceed the returns from the distributions. The stock price of Inspired has declined by 36% over the past three months, explaining the significant increase in the dividend yield. A strong dividend yield is indeed pleasing, but the sustainability of the distribution is equally important. Although Inspired is currently not generating a profit, the company generates healthy free cash flows that can easily cover the dividend. We often consider cash flow as more important than accounting profit metrics, so we are relatively satisfied with the current dividend level. Looking ahead, the company's earnings per share (EPS) could decrease by 27.7% if no turnaround is achieved. Should the recent dividend growth continue, the payout ratio could rise to 382% within 12 months, which is definitely too high to be sustainable in the long term. The company's dividend history is marked by instability, with at least one cut in the past ten years. From 2014 to the most recent distribution, the dividend has increased from £0.024 to £0.03, an annual growth rate of about 2.3%, but the fluctuations and limited growth may constrain the total return for shareholders. With relatively unstable dividends, it is all the more important to examine whether the EPS picture is improving, which could indicate future dividend growth. Earnings per share have declined by 28% annually over the past five years. These rapid declines could strain future dividend payments if the trend continues. In summary, even though a dividend increase always appears positive, we do not consider the payments from Inspired to be particularly solid. The dividends are not particularly stable, and the growth potential seems limited, although the distributions are well covered by cash flows. For these reasons, we would likely consider other income investments. Companies with stable dividend policies tend to attract more investor interest than those with erratic approaches. Investors should, however, consider many factors besides dividend payouts to make an informed investment decision.