The board of Amcor plc (NYSE:AMCR) has announced that it will pay a dividend on the 27th of September, with investors receiving $0.1225 per share. This makes the dividend yield 5.2%, which will augment investor returns quite nicely.
Check out our latest analysis for Amcor
Amcor's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Amcor's dividend was only 69% of earnings, however it was paying out 95% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
The next year is set to see EPS grow by 0.1%. If the dividend continues on this path, the payout ratio could be 69% by next year, which we think can be pretty sustainable going forward.
Amcor Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2019, the dividend has gone from $0.48 total annually to $0.49. Dividend payments have grown at less than 1% a year over this period. 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.
We Could See Amcor's Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Amcor has seen EPS rising for the last five years, at 8.0% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
Our Thoughts On Amcor's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Amcor you should be aware of, and 1 of them can't be ignored. Is Amcor not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About NYSE:AMCR
Amcor
Develops, produces, and sells packaging products in Europe, North America, Latin America, and the Asia Pacific.
Good value with limited growth.
