ECO Animal Health Group plc (LON:EAH) Pays A 2.0% In Just 2 Days
It looks like ECO Animal Health Group plc (LON:EAH) is about to go ex-dividend in the next 2 days. Ex-dividend means that investors that purchase the stock on or after the 26th of September will not receive this dividend, which will be paid on the 16th of October.
ECO Animal Health Group's next dividend payment will be UK£0.07 per share. Last year, in total, the company distributed UK£0.1 to shareholders. Last year's total dividend payments show that ECO Animal Health Group has a trailing yield of 3.1% on the current share price of £3.57. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether ECO Animal Health Group has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for ECO Animal Health Group
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. ECO Animal Health Group paid out 63% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out an unsustainably high 282% of its free cash flow as dividends over the past 12 months, which is worrying. Our definition of free cash flow excludes cash generated from asset sales, so since ECO Animal Health Group is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.
ECO Animal Health Group paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to ECO Animal Health Group's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see ECO Animal Health Group has grown its earnings rapidly, up 32% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. ECO Animal Health Group has delivered 4.4% dividend growth per year on average over the past ten years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
The Bottom Line
Should investors buy ECO Animal Health Group for the upcoming dividend? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note ECO Animal Health Group paid out a much higher percentage of its free cash flow, which makes us uncomfortable. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
Wondering what the future holds for ECO Animal Health Group? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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