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Andrew Peller's (TSE:ADW.A) Shareholders Will Receive A Bigger Dividend Than Last Year

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Andrew Peller Limited (TSE:ADW.A) has announced that it will be increasing its dividend on the 8th of October to CA$0.061. This makes the dividend yield 2.7%, which is above the industry average.

View our latest analysis for Andrew Peller

Andrew Peller's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Andrew Peller's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 14.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
historic-dividend

Andrew Peller Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the dividend has gone from CA$0.11 to CA$0.22. This implies that the company grew its distributions at a yearly rate of about 7.1% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Andrew Peller hasn't seen much change in its earnings per share over the last five years.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Andrew Peller's payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

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. To that end, Andrew Peller has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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