AfroCentric Investment (JSE:ACT) Has Announced A Dividend Of ZAR0.17

The board of AfroCentric Investment Corporation Limited (JSE:ACT) has announced that it will pay a dividend of ZAR0.17 per share on the 14th of November. Based on this payment, the dividend yield on the company's stock will be 6.5%, which is an attractive boost to shareholder returns.

Our analysis indicates that ACT is potentially overvalued!

AfroCentric Investment's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, AfroCentric Investment's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 20.8% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.

AfroCentric Investment Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ZAR0.105 in 2012, and the most recent fiscal year payment was ZAR0.34. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that AfroCentric Investment has grown earnings per share at 21% per year over the past five years. AfroCentric Investment is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

AfroCentric Investment Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think AfroCentric Investment might even raise payments in the future. 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. 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. For instance, we've picked out 1 warning sign for AfroCentric Investment that investors should take into consideration. 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.