Aeorema Communications' (LON:AEO) Dividend Will Be £0.03

Aeorema Communications plc (LON:AEO) has announced that it will pay a dividend of £0.03 per share on the 20th of January. This means the annual payment is 5.7% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Aeorema Communications

Estimates Indicate Aeorema Communications' Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, Aeorema Communications was paying out 83% of earnings, but a comparatively small 25% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, EPS could fall by 1.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 98%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was £0.02 in 2014, and the most recent fiscal year payment was £0.03. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Achieve

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. Aeorema Communications hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Aeorema Communications' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Aeorema Communications' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

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, Aeorema Communications has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Aeorema Communications not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.