Andrew Peller's (TSE:ADW.A) Upcoming Dividend Will Be Larger Than Last Year's

Andrew Peller Limited's (TSE:ADW.A) dividend will be increasing to CA$0.061 on 7th of January. This makes the dividend yield 3.0%, which is above the industry average.

Check out our latest analysis for Andrew Peller

Andrew Peller's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Andrew Peller was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 31.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.

Andrew Peller Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the first annual payment was CA$0.11, compared to the most recent full-year payment of CA$0.22. This works out to be a compound annual growth rate (CAGR) of approximately 7.1% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Unfortunately, Andrew Peller's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Andrew Peller's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Andrew Peller's payments are rock solid. While Andrew Peller is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Andrew Peller you should be aware of, and 2 of them are concerning. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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