Alpha Financial Markets Consulting (LON:AFM) dividend to be raised to £0.075

Alpha Financial Markets Consulting plc (LON:AFM) the dividend will increase from the payout for the same period last year to £0.075 on September 20. This brings the dividend yield to 2.4%, which is above the industry average.

Check out our latest analysis for Alpha Financial Markets Consulting

Alpha Financial Markets Consulting payment has strong earnings coverage

A big dividend yield for a few years doesn’t mean much if it can’t be sustained. Based on the last payout, Alpha Financial Markets Consulting’s earnings did not cover the dividend, but rather the company was generating enough cash. Healthy cash flow is always a positive sign, especially when it covers the dividend quite easily.

Next year is expected to see EPS grow by 189.9%. If the dividend continues to follow recent trends, we estimate that the payout ratio will be 54%, which would give us comfort in the sustainability of the dividend, despite the currently quite high levels.

AIM: Historic AFM dividend July 31, 2022

Alpha Financial Markets Consulting’s dividend lacks consistency

Even in its relatively short history, the company has cut the dividend at least once. If the company cuts once, that’s certainly no argument against the possibility of it cutting in the future. The annual payment over the past 5 years was £0.0296 in 2017, and the most recent year’s payment was £0.104. This means that it has increased its distributions by 29% per year during this period. Dividends have grown rapidly over this period, but with cuts in the past, we’re not sure this stock will be a reliable source of income in the future.

Alpha Financial Markets Consulting’s dividend may lack growth

Earnings per share growth could be a mitigating factor given past dividend fluctuations. It is encouraging to see that Alpha Financial Markets Consulting has increased its earnings per share by 30% per year over the past five years. While EPS is growing rapidly, Alpha Financial Markets Consulting paid out 135% of its earnings as dividends. If earnings continue to grow, this dividend could be sustainable, but we think such a high payout is certainly worth watching.

Our thoughts on the dividend from Alpha Financial Markets Consulting

Overall, it’s probably not a great income stock, even though the dividend is being increased right now. The company generates a lot of cash, which could sustain the dividend for a while, but the balance sheet isn’t great. We don’t think Alpha Financial Markets Consulting is a great stock to add to your portfolio if income is your priority.

Investors generally tend to favor companies with a consistent and stable dividend policy as opposed to those with an irregular one. Meanwhile, despite the importance of dividend payouts, these are not the only factors our readers should be aware of when evaluating a company. For example, we chose 2 warning signs for Alpha Financial Markets Consulting that investors should consider. Looking for more high yield dividend ideas? Try our collection of strong dividend payers.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.