Andersons' (NASDAQ:ANDE) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of The Andersons, Inc. (NASDAQ:ANDE) has announced that it will be increasing its dividend by 2.8% on the 20th of January to $0.185, up from last year's comparable payment of $0.18. This will take the annual payment to 2.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Andersons

Andersons' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Andersons is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

EPS is set to fall by 26.7% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 25%, which is comfortable for the company to continue in the future.

Andersons Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.72. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Andersons has impressed us by growing EPS at 22% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Andersons will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Andersons you should be aware of, and 3 of them don't sit too well with us. 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.