Amcor (NYSE:AMCR) Will Pay A Dividend Of $0.125

Amcor plc (NYSE:AMCR) has announced that it will pay a dividend of $0.125 per share on the 12th of December. The dividend yield will be 5.5% based on this payment which is still above the industry average.

View our latest analysis for Amcor

Amcor's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Amcor was paying out 74% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Looking forward, earnings per share is forecast to rise by 5.0% over the next year. If the dividend continues on this path, the payout ratio could be 72% by next year, which we think can be pretty sustainable going forward.

Amcor Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2019, the dividend has gone from $0.48 total annually to $0.50. This implies that the company grew its distributions at a yearly rate of about 1.0% over that duration. Amcor hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Amcor has grown earnings per share at 7.3% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Amcor's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Amcor's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Amcor has been making. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Amcor (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.