Accelleron Industries' (VTX:ACLN) Dividend Will Be Increased To $0.85

Accelleron Industries AG (VTX:ACLN) will increase its dividend from last year's comparable payment on the 30th of May to $0.85. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

Check out our latest analysis for Accelleron Industries

Accelleron Industries' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Accelleron Industries' was paying out quite a large proportion of earnings and 81% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Looking forward, earnings per share is forecast to rise by 87.9% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 42% which would be quite comfortable going to take the dividend forward.

Accelleron Industries Doesn't Have A Long Payment History

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Accelleron Industries' earnings per share is down 18% over the past year. While this is not ideal, one year is a short time in business, and we wouldn't want to get too hung up on this. However, we would never make any decisions based on only a single year of data, especially when assessing long term dividend potential.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Accelleron Industries' payments are rock solid. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Accelleron Industries that investors need to be conscious of moving forward. Is Accelleron Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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