Elementis' (LON:ELM) Dividend Will Be $0.0097

The board of Elementis plc (LON:ELM) has announced that it will pay a dividend on the 26th of September, with investors receiving $0.0097 per share. This takes the annual payment to 2.5% of the current stock price, which is about average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Elementis' stock price has increased by 42% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Elementis' Long-term Dividend Outlook appears Promising

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Elementis is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, so there isn't too much pressure on the dividend.

Check out our latest analysis for Elementis

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 dividend has gone from $0.154 total annually to $0.058. The dividend has shrunk at around 9.3% 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 Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Elementis has seen EPS rising for the last five years, at 14% per annum. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Elementis will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Elementis is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Elementis that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.