Stock Analysis

Aspen Pharmacare Holdings (JSE:APN) Is Increasing Its Dividend To ZAR3.26

JSE:APN
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Aspen Pharmacare Holdings Limited (JSE:APN) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of September to ZAR3.26. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

View our latest analysis for Aspen Pharmacare Holdings

Aspen Pharmacare Holdings' Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Aspen Pharmacare Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 9.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

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JSE:APN Historic Dividend September 7th 2022

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ZAR1.05 in 2012, and the most recent fiscal year payment was ZAR3.26. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Aspen Pharmacare Holdings has impressed us by growing EPS at 5.3% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Aspen Pharmacare Holdings' prospects of growing its dividend payments in the future.

Our Thoughts On Aspen Pharmacare Holdings' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Aspen Pharmacare Holdings analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Aspen Pharmacare Holdings 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.