Phibro Animal Health (NASDAQ:PAHC) Is Due To Pay A Dividend Of $0.12
The board of Phibro Animal Health Corporation (NASDAQ:PAHC) has announced that it will pay a dividend of $0.12 per share on the 28th of September. This means that the annual payment will be 2.4% of the current stock price, which is in line with the average for the industry.
Check out our latest analysis for Phibro Animal Health
Phibro Animal Health's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Phibro Animal Health was paying only paying out a fraction of earnings, but the payment was a massive 2,167% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
Looking forward, earnings per share is forecast to fall by 27.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 47%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Phibro Animal Health Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2014, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.48. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. Phibro Animal Health hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
Phibro Animal Health May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. It's not great to see that Phibro Animal Health's earnings per share has fallen at approximately 2.3% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Phibro Animal Health is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Phibro Animal Health has 3 warning signs (and 2 which can't be ignored) we think you should know about. 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.
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