Yahoo Finance Elders (ASX:ELD) Is Increasing Its Dividend To AU$0.28
Elders Limited's (ASX:ELD) dividend will be increasing to AU$0.28 on 17th of June. Based on the announced payment, the dividend yield for the company will be 3.6%, which is fairly typical for the industry.
Check out our latest analysis for Elders
Elders' Earnings Easily Cover the Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last dividend, Elders is earning enough to cover the payment, but the it makes up 176% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
EPS is set to fall by 11.1% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 67%, which is comfortable for the company to continue in the future.
Elders Is Still Building Its Track Record
It is great to see that Elders has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The first annual payment during the last 5 years was AU$0.075 in 2017, and the most recent fiscal year payment was AU$0.56. This means that it has been growing its distributions at 49% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend Has Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Elders has grown earnings per share at 8.9% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
Our Thoughts On Elders' Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Elders has 2 warning signs (and 1 which is concerning) 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.
