ALS (ASX:ALQ) Is Increasing Its Dividend To A$0.194

ALS Limited (ASX:ALQ) will increase its dividend on the 6th of July to A$0.194, which is 14% higher than last year's payment from the same period of A$0.17. This takes the annual payment to 3.2% of the current stock price, which is about average for the industry.

View our latest analysis for ALS

ALS' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, ALS' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 28.3%. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of A$0.47 in 2013 to the most recent total annual payment of A$0.373. Doing the maths, this is a decline of about 2.3% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that ALS has grown earnings per share at 34% per year over the past five years. ALS is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like ALS' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for ALS that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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