Alpha Financial Markets Consulting (LON:AFM) Is Paying Out A Larger Dividend Than Last Year
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 3.7%, providing a nice boost to shareholder returns.
Check out our latest analysis for Alpha Financial Markets Consulting
Alpha Financial Markets Consulting's Payment Has Solid Earnings Coverage
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 55% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
The next year is set to see EPS grow by 59.3%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 70% which would be quite comfortable going to take the dividend forward.
Alpha Financial Markets Consulting's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the dividend has gone from £0.0296 total annually to £0.142. This implies that the company grew its distributions at a yearly rate of about 30% 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.
Dividend Growth Could Be Constrained
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. Alpha Financial Markets Consulting has seen EPS rising for the last five years, at 23% per annum. However, Alpha Financial Markets Consulting isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Alpha Financial Markets Consulting's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
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. As an example, we've identified 1 warning sign for Alpha Financial Markets Consulting that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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