Albertsons Companies, Inc. (NYSE:ACI) has announced that it will pay a dividend of $0.15 per share on the 6th of February. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.
Albertsons Companies’ Projected Earnings Seem Likely To Cover Future Distributions
We like to see robust dividend yields, but that doesn’t matter if the payment isn’t sustainable. Before making this announcement, Albertsons Companies was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 57.2% over the next year. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.
Albertsons Companies Doesn’t Have A Long Payment History
The dividend’s track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 5 years was $0.40 in 2021, and the most recent fiscal year payment was $0.60. This means that it has been growing its distributions at 8.4% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Albertsons Companies to be a consistent dividend paying stock.
Albertsons Companies May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren’t all that rosy. However, Albertsons Companies’ EPS was effectively flat over the past five years, which could stop the company from paying more every year.
In Summary
Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don’t think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we’ve identified 2 warning signs for Albertsons Companies that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.