Amcor (NYSE:AMCR) Has Announced That It Will Be Increasing Its Dividend To $0.1275

Amcor plc (NYSE:AMCR) will increase its dividend from last year's comparable payment on the 11th of December to $0.1275. This takes the dividend yield to 5.0%, which shareholders will be pleased with.

View our latest analysis for Amcor

Amcor's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, Amcor was paying out a very large proportion of what it was earning and 109% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 40.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 69%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Amcor Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 5 years was $0.48 in 2019, and the most recent fiscal year payment was $0.51. This works out to be a compound annual growth rate (CAGR) of approximately 1.2% 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.

Amcor's Dividend Might Lack Growth

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Amcor has grown earnings per share at 11% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Amcor will make a great income stock. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Amcor that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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