Phibro Animal Health (NASDAQ:PAHC) Has Affirmed Its Dividend Of $0.12

Phibro Animal Health Corporation's (NASDAQ:PAHC) investors are due to receive a payment of $0.12 per share on 28th of September. This means that the annual payment will be 2.4% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Phibro Animal Health

Phibro Animal Health's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Phibro Animal Health was paying only paying out a fraction of earnings, but the payment was a massive 2,167% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to fall by 27.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 47%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Phibro Animal Health Is Still Building Its Track Record

It is great to see that Phibro Animal Health has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 8 years was $0.40 in 2014, and the most recent fiscal year payment was $0.48. This means that it has been growing its distributions at 2.3% per annum over that time. Phibro Animal Health 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's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Phibro Animal Health's EPS has declined at around 2.3% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

The Dividend Could Prove To Be Unreliable

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 redeeming feature, this is offset by the minimal cash to cover the payments. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Phibro Animal Health (of which 2 are a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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