Alpha Financial Markets Consulting's (LON:AFM) Shareholders Will Receive A Bigger 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 takes the dividend yield to 3.7%, which shareholders will be pleased with.
See our latest analysis for Alpha Financial Markets Consulting
Alpha Financial Markets Consulting's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Alpha Financial Markets Consulting was paying out 90% of earnings, but a comparatively small 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.
Looking forward, earnings per share is forecast to rise by 59.3% over the next year. 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
It's comforting to see that Alpha Financial Markets Consulting has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the dividend has gone from £0.0296 total annually to £0.142. This means that it has been growing its distributions at 37% per annum over that time. 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
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Alpha Financial Markets Consulting has seen EPS rising for the last five years, at 23% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Alpha Financial Markets Consulting hasn't been doing.
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 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Alpha Financial Markets Consulting that investors should know about before committing capital to this stock. Is Alpha Financial Markets Consulting 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.
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