Zotefoams' (LON:ZTF) Dividend Will Be Increased To £0.049
Zotefoams plc (LON:ZTF) will increase its dividend on the 3rd of June to £0.049, which is 6.1% higher than last year's payment from the same period of £0.0462. Although the dividend is now higher, the yield is only 2.0%, which is below the industry average.
Check out our latest analysis for Zotefoams
Zotefoams' Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. Zotefoams is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Over the next year, EPS is forecast to expand by 71.6%. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from £0.053 total annually to £0.069. This implies that the company grew its distributions at a yearly rate of about 2.7% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Zotefoams May Find It Hard To Grow The Dividend
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. Earnings per share has been crawling upwards at 2.3% per year. While growth may be thin on the ground, Zotefoams could always pay out a higher proportion of earnings to increase shareholder returns.
Our Thoughts On Zotefoams' Dividend
In summary, while it's always good to see the dividend being raised, we don't think Zotefoams' payments are rock solid. While Zotefoams is earning enough to cover the payments, the cash flows are lacking. We don't think Zotefoams is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Zotefoams stock. Is Zotefoams 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.
