Yahoo Finance Dechra Pharmaceuticals (LON:DPH) Has Announced That It Will Be Increasing Its Dividend To £0.3289
Dechra Pharmaceuticals PLC's (LON:DPH) dividend will be increasing from last year's payment of the same period to £0.3289 on 18th of November. Although the dividend is now higher, the yield is only 1.5%, which is below the industry average.
Check out our latest analysis for Dechra Pharmaceuticals
Dechra Pharmaceuticals' Earnings Easily Cover The Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Dechra Pharmaceuticals was paying out quite a large proportion of both earnings and cash flow, with the dividend being 113% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.
Over the next year, EPS is forecast to expand by 71.0%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 59% which brings it into quite a comfortable range.
Dechra Pharmaceuticals Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of £0.121 in 2012 to the most recent total annual payment of £0.449. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
Dechra Pharmaceuticals Might Find It Hard To Grow Its Dividend
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Dechra Pharmaceuticals has grown earnings per share at 13% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.
Our Thoughts On Dechra Pharmaceuticals' Dividend
In summary, while it's always good to see the dividend being raised, we don't think Dechra Pharmaceuticals' payments are rock solid. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Dechra Pharmaceuticals that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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