Andrews Sykes Group (LON:ASY) Is Due To Pay A Dividend Of £0.14

Andrews Sykes Group plc (LON:ASY) will pay a dividend of £0.14 on the 21st of June. Based on this payment, the dividend yield on the company's stock will be 4.3%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Andrews Sykes Group

Andrews Sykes Group Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Andrews Sykes Group's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to grow by 1.0% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 201%, which probably can't continue without starting to put some pressure on the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from £0.071 total annually to £0.259. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Andrews Sykes Group May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Andrews Sykes Group hasn't seen much change in its earnings per share over the last five years. Paying more than double what it is paying out, and not showing a track record of being able to grow earnings, we can only see dividend cuts in the future.

Our Thoughts On Andrews Sykes Group's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Andrews Sykes Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Andrews Sykes Group that investors should take into consideration. Is Andrews Sykes Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.