Stock Analysis

ADvTECH (JSE:ADH) Will Pay A Larger Dividend Than Last Year At ZAR0.30

JSE:ADH
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ADvTECH Limited (JSE:ADH) will increase its dividend on the 18th of September to ZAR0.30, which is 30% higher than last year's payment from the same period of ZAR0.23. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.

View our latest analysis for ADvTECH

ADvTECH's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite easily covered by ADvTECH's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share could rise by 20.8% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

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JSE:ADH Historic Dividend August 31st 2023

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. The annual payment during the last 10 years was ZAR0.24 in 2013, and the most recent fiscal year payment was ZAR0.60. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. ADvTECH has seen EPS rising for the last five years, at 21% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that ADvTECH could prove to be a strong dividend payer.

ADvTECH 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. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on ADvTECH management tenure, salary, and performance. If you are a dividend investor, you might also want to look at our curated list of high yield 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.