Aeorema Communications (LON:AEO) Is Paying Out A Larger Dividend Than Last Year
Aeorema Communications plc (LON:AEO) will increase its dividend on the 19th of January to £0.03, which is 50% higher than last year's payment from the same period of £0.02. This will take the annual payment to 2.7% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for Aeorema Communications
Aeorema Communications' Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Aeorema Communications' 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.
If the trend of the last few years continues, EPS will grow by 70.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of £0.015 in 2013 to the most recent total annual payment of £0.02. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Aeorema Communications has seen EPS rising for the last five years, at 70% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
Aeorema Communications 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Aeorema Communications has 3 warning signs (and 1 which is potentially serious) we think you should know about. Is Aeorema Communications 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.
