Phibro Animal Health (NASDAQ:PAHC) Is Due To Pay A Dividend Of $0.12

The board of Phibro Animal Health Corporation (NASDAQ:PAHC) has announced that it will pay a dividend of $0.12 per share on the 27th of March. Based on this payment, the dividend yield on the company's stock will be 4.1%, which is an attractive boost to shareholder returns.

View our latest analysis for Phibro Animal Health

Phibro Animal Health's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Phibro Animal Health's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Phibro Animal Health Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.40 in 2014, and the most recent fiscal year payment was $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 27% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

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. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Phibro Animal Health is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Phibro Animal Health (of which 1 shouldn't be ignored!) you should know about. Is Phibro Animal Health not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.