The board of AdvanSix Inc. (NYSE:ASIX) has announced that it will pay a dividend of $0.16 per share on the 27th of May. Based on this payment, the dividend yield on the company's stock will be 2.8%, which is an attractive boost to shareholder returns.
AdvanSix's Payment Could Potentially Have Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, AdvanSix's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 9.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for AdvanSix
AdvanSix Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2021, the dividend has gone from $0.50 total annually to $0.64. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. AdvanSix has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. AdvanSix has impressed us by growing EPS at 24% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
AdvanSix Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on AdvanSix management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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