Animalcare Group (LON:ANCR) Will Pay A Dividend Of UK£0.02
The board of Animalcare Group plc (LON:ANCR) has announced that it will pay a dividend of UK£0.02 per share on the 19th of November. This payment means the dividend yield will be 1.0%, which is below the average for the industry.
Check out our latest analysis for Animalcare Group
Animalcare Group Doesn't Earn Enough To Cover Its Payments
Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Animalcare Group's profits didn't cover the dividend, but the company was generating enough cash instead. 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 is forecast to grow rapidly. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 136%, which is unsustainable.
Animalcare Group's Dividend Has Lacked Consistency
The track record isn't the longest, but we are already seeing a bit of instability in the payments. The last annual payment of UK£0.04 was flat on the first annual payment 3 years ago. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Animalcare Group's EPS has declined at around 73% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.
Animalcare Group's Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
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. For example, we've picked out 4 warning signs for Animalcare Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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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