Anpario (LON:ANP) Has Announced That It Will Be Increasing Its Dividend To £0.0315

Anpario plc's (LON:ANP) periodic dividend will be increasing on the 25th of November to £0.0315, with investors receiving 5.0% more than last year's £0.03. This takes the annual payment to 2.1% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Anpario

Anpario's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last dividend, Anpario is earning enough to cover the payment, but then it makes up 620% 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 could rise by 8.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of £0.024 in 2012 to the most recent total annual payment of £0.102. This means that it has been growing its distributions at 16% per annum over that time. 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.

We Could See Anpario's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Anpario has impressed us by growing EPS at 8.3% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Anpario's Dividend

Overall, we always like to see the dividend being raised, but we don't think Anpario will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Anpario that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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