Yahoo Finance Alumasc Group (LON:ALU) Is Increasing Its Dividend To £0.0665
The Alumasc Group plc (LON:ALU) will increase its dividend on the 4th of November to £0.0665, which is 6.4% higher than last year's payment from the same period of £0.0625. This will take the dividend yield to an attractive 6.4%, providing a nice boost to shareholder returns.
Check out our latest analysis for Alumasc Group
Alumasc Group's Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Alumasc Group was paying only paying out a fraction of earnings, but the payment was a massive 275% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
Looking forward, earnings per share is forecast to fall by 4.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 40%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.02 in 2012, and the most recent fiscal year payment was £0.10. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
Alumasc Group Could Grow Its Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Alumasc Group has grown earnings per share at 7.9% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Alumasc Group will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Alumasc Group has 4 warning signs (and 2 which don't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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