Yahoo Finance Animalcare Group's (LON:ANCR) Dividend Will Be Increased To £0.03
Animalcare Group plc (LON:ANCR) has announced that it will be increasing its dividend from last year's comparable payment on the 19th of July to £0.03. This makes the dividend yield about the same as the industry average at 2.3%.
See our latest analysis for Animalcare Group
Animalcare Group Is Paying Out More Than It Is Earning
We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, the company was paying out 251% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 36%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.
Over the next year, EPS could expand by 65.2% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 147%, which is a bit high and could start applying pressure to the balance sheet.
Animalcare Group's Dividend Has Lacked Consistency
Animalcare Group has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2018, the dividend has gone from £0.04 total annually to £0.05. This means that it has been growing its distributions at 3.8% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
Animalcare Group Might Find It Hard To Grow Its Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Animalcare Group has seen EPS rising for the last five years, at 65% per annum. While EPS is growing rapidly, Animalcare Group paid out a very high 251% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.
Our Thoughts On Animalcare Group's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Animalcare Group's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Animalcare Group has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
