Anpario (LON:ANP) Will Pay A Larger Dividend Than Last Year At £0.08

The board of Anpario plc (LON:ANP) has announced that it will be increasing its dividend by 6.7% on the 25th of July to £0.08, up from last year's comparable payment of £0.075. Based on this payment, the dividend yield for the company will be 2.7%, which is fairly typical for the industry.

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Anpario's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Anpario's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS could expand by 2.1% if recent trends continue. If the dividend continues on this path, the payout ratio could be 60% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Anpario

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was £0.045 in 2015, and the most recent fiscal year payment was £0.113. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Anpario May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.1% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 2.1% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Anpario's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Anpario has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is Anpario not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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