Yahoo Finance Dechra Pharmaceuticals' (LON:DPH) Shareholders Will Receive A Bigger Dividend Than Last Year
Dechra Pharmaceuticals PLC (LON:DPH) will increase its dividend from last year's comparable payment on the 18th of November to £0.3289. Even though the dividend went up, the yield is still quite low at only 1.4%.
Check out our latest analysis for Dechra Pharmaceuticals
Dechra Pharmaceuticals' Dividend Is Well Covered By Earnings
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. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.
The next year is set to see EPS grow by 80.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
Dechra Pharmaceuticals Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of £0.121 in 2012 to the most recent total annual payment of £0.449. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
Dividend Growth Could Be Constrained
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Dechra Pharmaceuticals has grown earnings per share at 13% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.
Our Thoughts On Dechra Pharmaceuticals' Dividend
Overall, we always like to see the dividend being raised, but we don't think Dechra Pharmaceuticals will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Dechra Pharmaceuticals is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Dechra Pharmaceuticals that investors need to be conscious of moving forward. Is Dechra Pharmaceuticals not quite the opportunity you were looking for? Why not check out our selection of top 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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