Yahoo Finance ALS' (ASX:ALQ) Dividend Will Be A$0.196
ALS Limited (ASX:ALQ) will pay a dividend of A$0.196 on the 2nd of July. This takes the annual payment to 2.7% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for ALS
ALS' Payment Has Solid Earnings Coverage
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 50% which is fairly sustainable.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of A$0.39 in 2014 to the most recent total annual payment of A$0.392. Dividend payments have been growing, but very slowly over the period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though ALS' EPS has declined at around 40% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
ALS' Dividend Doesn't Look Great
Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, ALS has 4 warning signs (and 1 which can't be ignored) we think you should know about. Is ALS not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
