Anpario's (LON:ANP) Dividend Will Be Increased To £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 2.5%, which is fairly typical for the industry.

We've discovered 2 warning signs about Anpario. View them for free.

Anpario's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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.

Over the next year, EPS could expand by 2.1% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 60%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Anpario

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was £0.045, compared to the most recent full-year payment of £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.

The Dividend's Growth Prospects Are Limited

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. Earnings per share has been crawling upwards at 2.1% per year. 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.

Our Thoughts On Anpario's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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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