Yahoo Finance Aramark (NYSE:ARMK) Has Announced A Dividend Of $0.11
The board of Aramark (NYSE:ARMK) has announced that it will pay a dividend on the 31st of May, with investors receiving $0.11 per share. This means the annual payment will be 1.3% of the current stock price, which is lower than the industry average.
View our latest analysis for Aramark
Aramark's Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Aramark's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 197.0%. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.
Aramark Doesn't Have A Long Payment History
Aramark's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 9 years was $0.30 in 2014, and the most recent fiscal year payment was $0.44. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Aramark hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
The Dividend Has Limited Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Aramark's EPS has fallen by approximately 17% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
Our Thoughts On Aramark's Dividend
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. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Aramark that investors need to be conscious of moving forward. Is Aramark 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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