Alumasc Group (LON:ALU) Will Pay A Larger Dividend Than Last Year At £0.069

The board of The Alumasc Group plc (LON:ALU) has announced that the dividend on 3rd of November will be increased to £0.069, which will be 3.8% higher than last year's payment of £0.0665 which covered the same period. This takes the dividend yield to 6.4%, which shareholders will be pleased with.

View our latest analysis for Alumasc Group

Alumasc Group's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Alumasc Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 14.0%. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was £0.02, compared to the most recent full-year payment of £0.103. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Alumasc Group has grown earnings per share at 16% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Alumasc Group's Dividend

Overall, a dividend increase is always good, and we think that Alumasc Group is a strong income stock thanks to its track record and growing earnings. 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.

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. For example, we've picked out 2 warning signs for Alumasc 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 yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.