ACCO Brands (NYSE:ACCO) Has Announced A Dividend Of $0.075

The board of ACCO Brands Corporation (NYSE:ACCO) has announced that it will pay a dividend of $0.075 per share on the 12th of September. This makes the dividend yield 4.9%, which will augment investor returns quite nicely.

See our latest analysis for ACCO Brands

ACCO Brands Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. ACCO Brands is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

The next 12 months is set to see EPS grow by 106.3%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

ACCO Brands Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the dividend has gone from $0.24 total annually to $0.30. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. ACCO Brands hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though ACCO Brands' EPS has declined at around 22% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about ACCO Brands' payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for ACCO Brands (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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