Alpha Financial Markets Consulting (LON:AFM) Will Pay A Larger Dividend Than Last Year At £0.105
Alpha Financial Markets Consulting plc (LON:AFM) has announced that it will be increasing its dividend from last year's comparable payment on the 19th of September to £0.105. This will take the dividend yield to an attractive 4.0%, providing a nice boost to shareholder returns.
Check out our latest analysis for Alpha Financial Markets Consulting
Alpha Financial Markets Consulting's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Alpha Financial Markets Consulting's dividend made up quite a large proportion of earnings but only 54% of free cash flows. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 59.3%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 70% which brings it into quite a comfortable range.
Alpha Financial Markets Consulting's Dividend Has Lacked Consistency
Alpha Financial Markets Consulting has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 6 years was £0.0296 in 2017, and the most recent fiscal year payment was £0.142. This implies that the company grew its distributions at a yearly rate of about 30% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
Alpha Financial Markets Consulting's Dividend Might Lack Growth
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Alpha Financial Markets Consulting has seen EPS rising for the last five years, at 23% per annum. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Alpha Financial Markets Consulting will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Alpha Financial Markets Consulting is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Alpha Financial Markets Consulting that you should be aware of before investing. 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.
