AdvanSix's (NYSE:ASIX) Dividend Will Be Increased To $0.16
The board of AdvanSix Inc. (NYSE:ASIX) has announced that it will be paying its dividend of $0.16 on the 29th of August, an increased payment from last year's comparable dividend. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.
See our latest analysis for AdvanSix
AdvanSix's Dividend Is Well Covered By Earnings
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, AdvanSix's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 22.8% over the next year. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.
AdvanSix Is Still Building Its Track Record
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The annual payment during the last 2 years was $0.50 in 2021, and the most recent fiscal year payment was $0.64. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Although it's important to note that AdvanSix's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think AdvanSix is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for AdvanSix that investors should take into consideration. Is AdvanSix 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.
