Amcor's (NYSE:AMCR) Dividend Will Be Increased To $0.1225

The board of Amcor plc (NYSE:AMCR) has announced that it will be paying its dividend of $0.1225 on the 13th of December, an increased payment from last year's comparable dividend. This takes the dividend yield to 4.1%, which shareholders will be pleased with.

See our latest analysis for Amcor

Amcor's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Amcor was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to rise by 47.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 60%, which is in the range that makes us comfortable with the sustainability of the dividend.

Amcor Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of $0.48 in 2019 to the most recent total annual payment of $0.49. Dividend payments have grown at less than 1% a year over this period. Amcor hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 2.1% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 2.1% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Amcor is earning enough to cover the dividend, we are generally unimpressed with its future prospects. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Amcor (of which 1 makes us a bit uncomfortable!) you should know about. Is Amcor not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here