Alumasc Group (LON:ALU) Will Pay A Larger Dividend Than Last Year At £0.076

The Alumasc Group plc's (LON:ALU) periodic dividend will be increasing on the 4th of November to £0.076, with investors receiving 4.1% more than last year's £0.073. This makes the dividend yield about the same as the industry average at 3.2%.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Alumasc Group's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Alumasc Group's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 33.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

See our latest analysis for Alumasc Group

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of £0.05 in 2015 to the most recent total annual payment of £0.111. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Alumasc Group might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Alumasc Group has been growing its earnings per share at 37% a year over the past five years. Alumasc Group 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 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Alumasc Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.