Animalcare Group (LON:ANCR) Is Due To Pay A Dividend Of £0.02

The board of Animalcare Group plc (LON:ANCR) has announced that it will pay a dividend on the 17th of November, with investors receiving £0.02 per share. This means the dividend yield will be fairly typical at 2.4%.

See our latest analysis for Animalcare Group

Animalcare Group Is Paying Out More Than It Is Earning

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, the company was paying out 228% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 27%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Over the next year, EPS is forecast to fall by 63.9%. If the dividend continues along the path it has been on recently, the company could be paying out more than double what it is earning, which is definitely a bit high to be sustainable going forward.

Animalcare Group's Dividend Has Lacked Consistency

It's comforting to see that Animalcare Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of £0.04 in 2018 to the most recent total annual payment of £0.044. This implies that the company grew its distributions at a yearly rate of about 1.9% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Animalcare Group's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Animalcare Group has impressed us by growing EPS at 65% per year over the past five years. EPS has been growing well, but Animalcare Group has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Animalcare Group's 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. We don't think Animalcare Group is a great stock to add to your portfolio if income is your focus.

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 3 warning signs for Animalcare Group that you should be aware of before investing. Is Animalcare Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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