ACCO Brands (NYSE:ACCO) Will Pay A Dividend Of $0.075

ACCO Brands Corporation's (NYSE:ACCO) investors are due to receive a payment of $0.075 per share on 5th of April. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.

View our latest analysis for ACCO Brands

ACCO Brands' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, ACCO Brands' profits didn't cover the dividend, but the company was generating enough cash instead. 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.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 17%, which is in a comfortable range for us.

ACCO Brands Doesn't Have A Long Payment History

It is great to see that ACCO Brands has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.24 in 2018 to the most recent total annual payment of $0.30. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. 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

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. ACCO Brands' EPS has fallen by approximately 17% per year during the past five years. 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. 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

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, ACCO Brands has 4 warning signs (and 1 which is concerning) 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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