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We Wouldn't Be Too Quick To Buy Animalcare Group plc (LON:ANCR) Before It Goes Ex-Dividend

Simply Wall St

It looks like Animalcare Group plc (LON:ANCR) is about to go ex-dividend in the next 3 days. You can purchase shares before the 24th of October in order to receive the dividend, which the company will pay on the 22nd of November.

Animalcare Group's next dividend payment will be UK£0.02 per share. Last year, in total, the company distributed UK£0.04 to shareholders. Calculating the last year's worth of payments shows that Animalcare Group has a trailing yield of 2.7% on the current share price of £1.65. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Animalcare Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Animalcare Group lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 37% of its free cash flow as dividends, a comfortable payout level for most companies.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

AIM:ANCR Historical Dividend Yield, October 20th 2019

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Animalcare Group was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Unfortunately Animalcare Group has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Remember, you can always get a snapshot of Animalcare Group's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Has Animalcare Group got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Ever wonder what the future holds for Animalcare 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.