The board of AstraZeneca PLC ( LON:AZN ) has announced that it will pay a dividend of UK£0.776 per share on the 9th of September. This makes the dividend yield about the same as the industry average at 1.9%.
View our latest analysis for AstraZeneca
AstraZeneca's Dividend Is Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. The last payment made up 71% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 96.7%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.
AstraZeneca Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $2.80 in 2014, and the most recent fiscal year payment was $3.10. This works out to be a compound annual growth rate (CAGR) of approximately 1.0% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that AstraZeneca has grown earnings per share at 19% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
AstraZeneca Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for AstraZeneca that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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About LSE:AZN
AstraZeneca
A biopharmaceutical company, focuses on the discovery, development, manufacture, and commercialization of prescription medicines.
Established dividend payer and good value.
