Aramark (NYSE:ARMK) Will Pay A Dividend Of $0.105

The board of Aramark (NYSE:ARMK) has announced that it will pay a dividend on the 28th of May, with investors receiving $0.105 per share. This payment means the dividend yield will be 1.2%, which is below the average for the industry.

Our free stock report includes 1 warning sign investors should be aware of before investing in Aramark. Read for free now.

Aramark's Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Aramark's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 72.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Aramark

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from $0.30 total annually to $0.42. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Although it's important to note that Aramark'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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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.

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. As an example, we've identified 1 warning sign for Aramark that you should be aware of before investing. Is Aramark not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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