Anpario (LON:ANP) Has Announced That It Will Be Increasing Its Dividend To UK£0.03

Anpario plc (LON:ANP) has announced that it will be increasing its dividend on the 26th of November to UK£0.03, which will be 9.1% higher than last year. This takes the annual payment to 1.5% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Anpario

Anpario's Earnings Easily Cover the Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Anpario's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the trend of the last few years continues, EPS will grow by 2.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from UK£0.02 in 2011 to the most recent annual payment of UK£0.092. This means that it has been growing its distributions at 17% per annum 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Anpario has only grown its earnings per share at 2.7% per annum over the past five years. Anpario is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Anpario that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

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