Yahoo Finance Zotefoams' (LON:ZTF) Upcoming Dividend Will Be Larger Than Last Year's
Zotefoams plc (LON:ZTF) has announced that it will be increasing its periodic dividend on the 3rd of June to £0.049, which will be 6.1% higher than last year's comparable payment amount of £0.0462. Although the dividend is now higher, the yield is only 1.9%, which is below the industry average.
Check out our latest analysis for Zotefoams
Zotefoams' Earnings Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Zotefoams was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Over the next year, EPS is forecast to expand by 71.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was £0.053, compared to the most recent full-year payment of £0.0718. This means that it has been growing its distributions at 3.1% per annum over that time. 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.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 2.3% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Zotefoams could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Zotefoams' Dividend
Overall, we always like to see the dividend being raised, but we don't think Zotefoams will make a great income stock. While Zotefoams is earning enough to cover the payments, the cash flows are lacking. 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. See if management have their own wealth at stake, by checking insider shareholdings in Zotefoams stock. 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.
