Phibro Animal Health Corporation’s (NASDAQ:PAHC) investors are due to receive a payment of $0.12 per share on 27th of September. The dividend yield will be 3.3% based on this payment which is still above the industry average.
Check out our latest analysis for Phibro Animal Health
Phibro Animal Health’s Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Phibro Animal Health was earning enough to cover the dividend, but it wasn’t generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
The next year is set to see EPS grow by 147.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.
Phibro Animal Health Doesn’t Have A Long Payment History
The dividend’s track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 9 years was $0.40 in 2014, and the most recent fiscal year payment was $0.48. This means that it has been growing its distributions at 2.0% per annum over that time. 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.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren’t as good as they seem. Over the past five years, it looks as though Phibro Animal Health’s EPS has declined at around 13% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It’s not all bad news though, as the earnings are predicted to rise over the next 12 months – we would just be a bit cautious until this becomes a long term trend.
Phibro Animal Health’s Dividend Doesn’t Look Sustainable
In summary, while it’s good to see that the dividend hasn’t been cut, we are a bit cautious about Phibro Animal Health’s payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We’ve spotted 3 warning signs for Phibro Animal Health (of which 1 doesn’t sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.