Alpha Financial Markets Consulting's (LON:AFM) Dividend Will Be Increased To £0.037

Alpha Financial Markets Consulting plc (LON:AFM) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of December to £0.037. This makes the dividend yield about the same as the industry average at 2.4%.

See our latest analysis for Alpha Financial Markets Consulting

Alpha Financial Markets Consulting's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Alpha Financial Markets Consulting's dividend made up quite a large proportion of earnings but only 44% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

The next year is set to see EPS grow by 24.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 69%, which is in the range that makes us comfortable with the sustainability of the dividend.

Alpha Financial Markets Consulting's Dividend Has Lacked Consistency

It's comforting to see that Alpha Financial Markets Consulting has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the annual payment back then was £0.0296, compared to the most recent full-year payment of £0.112. This works out to be a compound annual growth rate (CAGR) of approximately 30% a year over that time. Alpha Financial Markets Consulting has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Alpha Financial Markets Consulting has been growing its earnings per share at 24% a year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Alpha Financial Markets Consulting hasn't been doing.

We Really Like Alpha Financial Markets Consulting's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend 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. 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. Is Alpha Financial Markets Consulting not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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