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How safe is the Experian dividend payment?

17th May by Jack Brumby

Experian (LON:EXPN) is a large cap Professional Information Services operator that uses data science, analytics and technology that helps businesses to lend and prevent fraudThe Company's segments include Credit Services, Decision Analytics and Consumer Services.

For the six months ended 30 September 2018, Experian plc revenues increased 7% to $2.36bn, although net income before extraordinary items decreased 13% to $320m.  The group pays out a rolling dividend yield of 1.55%, and its shares trade at a punchy 27.5 times forecast earnings.

I'd like to know how safe Experian's dividend is. Dividend cover (earnings per share divided by dividend per share) of two times or above is strong. Anything below one and a half times suggests we need to look a little closer.

GET MORE DATA-DRIVEN INSIGHTS INTO LON:EXPN »

Computing Experian's dividend cover ratio

Poor dividend cover means that a small decline in earnings could consign your dividend payment to the scrap heap. It could also mean that the company is forgoing profitable investment opportunities that could generate future earnings growth. With that in mind, let’s take a look at Experian dividend cover.

We can get all the information we need to see if Experian has an adequate level of dividend cover from the group’s StockReport. The group’s trailing twelve month (TTM) EPS is 87p and its TTM dividend per share is 59p

Divide the former by the latter and we get a trailing twelve-month dividend cover for Experian of 1.47. This is below the 1.5 times cover limit that marks the point at which we should do some further digging on dividend sustainability and safety.

Income investing: what you need to know

For many investors, dividends are a vital part of their long-term strategy. That's why we have created a variety of income-focused stock screens, such as the Best Dividends Screen, to identify promising candidates for income portfolios. Take a look and see if any of the qualifying stocks might be worthy of further research.

As for Experian (LON:EXPN), you can find a wealth of financial data on the group's StockReport, including information on the group's past and forecast dividend payments. If you’d like to discover more about dividend investing, you can read our free ebook: How to Make Money in Dividend Stocks.

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