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

ACCO Brands Corporation (NYSE:ACCO) has announced that it will pay a dividend of $0.075 per share on the 12th of September. This means the annual payment is 5.6% of the current stock price, which is above the average for the industry.

View our latest analysis for ACCO Brands

ACCO Brands Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. ACCO Brands is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

The next 12 months is set to see EPS grow by 121.9%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

ACCO Brands Doesn't Have A Long Payment History

ACCO Brands' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.24 in 2018 to the most recent total annual payment of $0.30. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though ACCO Brands' EPS has declined at around 27% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, ACCO Brands has 2 warning signs (and 1 which is significant) we think you should know about. Is ACCO Brands not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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