Alpha Financial Markets Consulting (LON:AFM) Has Announced That It Will Be Increasing Its Dividend To £0.075

The board of Alpha Financial Markets Consulting plc (LON:AFM) has announced that it will be paying its dividend of £0.075 on the 20th of September, an increased payment from last year's comparable dividend. This takes the annual payment to 2.5% of the current stock price, which is about average for the industry.

View our latest analysis for Alpha Financial Markets Consulting

Alpha Financial Markets Consulting's Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Alpha Financial Markets Consulting's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise by 189.9% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 54% which brings it into quite a comfortable range.

Alpha Financial Markets Consulting's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the annual payment back then was £0.0296, compared to the most recent full-year payment of £0.104. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Alpha Financial Markets Consulting's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Alpha Financial Markets Consulting has been growing its earnings per share at 30% a year over the past five years. EPS has been growing well, but Alpha Financial Markets Consulting has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Our Thoughts On Alpha Financial Markets Consulting's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Alpha Financial Markets Consulting's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Alpha Financial Markets Consulting that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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