Adcorp Holdings' (JSE:ADR) Dividend Will Be ZAR0.2478

The board of Adcorp Holdings Limited (JSE:ADR) has announced that it will pay a dividend on the 19th of January, with investors receiving ZAR0.2478 per share. This makes the dividend yield 8.9%, which is above the industry average.

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Adcorp Holdings' Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Adcorp Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 42.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Adcorp Holdings

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from ZAR1.48 total annually to ZAR0.634. The dividend has shrunk at around 8.1% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Adcorp Holdings has been growing its earnings per share at 42% a year over the past five years. Adcorp Holdings is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Adcorp Holdings Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for Adcorp Holdings that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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