The advice of Anglo Pacific Group plc (LON: APF) has announced that it will pay a dividend of £ 0.018 per share on February 16. Including this payment, the dividend yield on the stock will be 6.8%, which is a modest boost to shareholder returns.
Check out our latest analysis for Anglo Pacific Group
Anglo Pacific Group distributions can be difficult to maintain
The dividend yield is a bit low, but the sustainability of payments is also an important part of valuing an income security. Even in the absence of profits, Anglo Pacific Group pays a dividend. It does not generate free cash flow either, we certainly have concerns about the sustainability of the dividend.
Recently, EPS fell 18.8%, which may continue into the next year. This will push the company into unprofitability, which means executives will have to choose between suspending the dividend or paying it out of cash reserves.
The company has a long history of dividends, but it doesn’t look good with the cuts of the past. Since 2011, the first annual payment was US $ 0.14, compared to the most recent annual payment of US $ 0.12. This represents a decrease of about 1.9% per year during this period. A business that decreases its dividend over time is usually not what we are looking for.
The potential for dividend growth is fragile
With a relatively volatile dividend, it is even more important to assess whether earnings per share are increasing, which could indicate an increase in the dividend in the future. Anglo Pacific Group’s EPS has fallen by about 19% per year over the past five years. Such rapid declines certainly have the potential to restrict dividend payments if the trend continues in the future.
The company has also raised capital by issuing shares equal to 21% of the outstanding shares in the past 12 months. Doing this regularly can be detrimental – it is difficult to increase dividends per share when new shares are regularly created.
We are not big fans of the Anglo Pacific Group dividend
Overall, it is not a good candidate for an income investment, although the dividend has remained stable this year. The business seems to stretch a bit to make such large payments, but it doesn’t look like they can be consistent over time. Overall, that doesn’t really turn us on from a revenue standpoint.
It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. However, there are other things for investors to consider when analyzing the performance of stocks. For example, we have selected 2 warning signs for Anglo Pacific Group that investors should consider. If you are a dividend investor, you can also view our organized list of high performing dividend stocks.
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