abrdn (LON:ABDN) Is Due To Pay A Dividend Of £0.073

The board of abrdn plc (LON:ABDN) has announced that it will pay a dividend of £0.073 per share on the 27th of September. This means the annual payment is 8.4% of the current stock price, which is above the average for the industry.

View our latest analysis for abrdn

abrdn's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last dividend, abrdn is earning enough to cover the payment, but then it makes up 169% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to fall by 44.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 87%, which is definitely on the higher side.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from £0.193 total annually to £0.146. The dividend has shrunk at around 2.7% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

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. abrdn has impressed us by growing EPS at 17% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On abrdn's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about abrdn's payments, as there could be some issues with sustaining them into the future. While abrdn is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for abrdn that you should be aware of before investing. Is abrdn not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.