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

By
Simply Wall St
Published
November 04, 2021
NasdaqGM:PAHC
Source: Shutterstock

Phibro Animal Health Corporation (NASDAQ:PAHC) has announced that it will pay a dividend of US$0.12 per share on the 15th of December. This means the dividend yield will be fairly typical at 2.2%.

View our latest analysis for Phibro Animal Health

Phibro Animal Health's Earnings Easily Cover the Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Phibro Animal Health was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Over the next year, EPS is forecast to fall by 8.9%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 46%, which we are pretty comfortable with and we think is feasible on an earnings basis.

historic-dividend
NasdaqGM:PAHC Historic Dividend November 5th 2021

Phibro Animal Health Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The first annual payment during the last 7 years was US$0.40 in 2014, and the most recent fiscal year payment was US$0.48. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% 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.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Phibro Animal Health's earnings per share has shrunk at approximately 9.1% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Phibro Animal Health's payments, as there could be some issues with sustaining them into the future. While Phibro Animal Health is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Phibro Animal Health you should be aware of, and 1 of them is a bit concerning. We have also put together a list of global stocks with a solid dividend.

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