Acomo's (AMS:ACOMO) Dividend Will Be €0.75

Acomo N.V. (AMS:ACOMO) has announced that it will pay a dividend of €0.75 per share on the 8th of May. However, the dividend yield of 6.6% is still a decent boost to shareholder returns.

View our latest analysis for Acomo

Acomo's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Acomo's dividend made up quite a large proportion of earnings but only 26% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 30.5% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from €0.70 total annually to €1.15. This implies that the company grew its distributions at a yearly rate of about 5.1% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Acomo might have put its house in order since then, but we remain cautious.

Acomo May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Acomo's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Acomo's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Our Thoughts On Acomo's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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 would be a touch cautious of relying on this stock primarily for the dividend income.

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 Acomo that investors should take into consideration. Is Acomo not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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