Alpha Financial Markets Consulting's (LON:AFM) Shareholders Will Receive A Bigger Dividend Than Last Year

Alpha Financial Markets Consulting plc's (LON:AFM) dividend will be increasing from last year's payment of the same period to £0.075 on 20th of September. This takes the annual payment to 2.3% 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 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. Based on the last payment, Alpha Financial Markets Consulting's profits didn't cover the dividend, but the company was generating enough cash instead. 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.

Over the next year, EPS is forecast to expand by 189.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Alpha Financial Markets Consulting's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was £0.0296, compared to the most recent full-year payment of £0.104. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. 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.

Alpha Financial Markets Consulting Might Find It Hard To Grow Its 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. Alpha Financial Markets Consulting has impressed us by growing EPS at 30% per year over the past five years. Although earnings per share is up nicely Alpha Financial Markets Consulting is paying out 135% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

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 company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Alpha Financial Markets Consulting is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Alpha Financial Markets Consulting that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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