Adcorp Holdings' (JSE:ADR) Upcoming Dividend Will Be Larger Than Last Year's

Adcorp Holdings Limited (JSE:ADR) will increase its dividend from last year's comparable payment on the 18th of August to ZAR0.5002. This will take the dividend yield to an attractive 9.5%, providing a nice boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Adcorp Holdings' stock price has increased by 65% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Adcorp Holdings' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Adcorp Holdings' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS could expand by 68.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Adcorp Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ZAR1.40 in 2015, and the most recent fiscal year payment was ZAR0.634. The dividend has shrunk at around 7.6% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. It's encouraging to see that Adcorp Holdings has been growing its earnings per share at 68% 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

Overall, a dividend increase is always good, and we think that Adcorp Holdings is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Adcorp Holdings you should be aware of, and 1 of them doesn't sit too well with us. 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.