Andrew Peller's (TSE:ADW.A) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Andrew Peller Limited (TSE:ADW.A) has announced that it will be increasing its dividend on the 8th of October to CA$0.061. This makes the dividend yield 2.7%, which is above the industry average.

Check out our latest analysis for Andrew Peller

Andrew Peller's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Andrew Peller's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 14.9% over the next year. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Andrew Peller Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2011, the first annual payment was CA$0.11, compared to the most recent full-year payment of CA$0.22. This means that it has been growing its distributions at 6.9% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Andrew Peller hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Andrew Peller's Dividend

Overall, we always like to see the dividend being raised, but we don't think Andrew Peller will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Andrew Peller you should be aware of, and 1 of them is a bit unpleasant. We have also put together a list of global stocks with a solid dividend.

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This article by Simply Wall St is general in nature. 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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