Phibro Animal Health Corporation (NASDAQ:PAHC) will pay a dividend of $0.12 on the 26th of March. This payment means that the dividend yield will be 2.0%, which is around the industry average.

See our latest analysis for Phibro Animal Health

Phibro Animal Health's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, the company was paying out 101% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 23% which is fairly sustainable.

Phibro Animal Health 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 $0.40 in 2015 to the most recent total annual payment of $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Phibro Animal Health's EPS has fallen by approximately 13% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Phibro Animal Health's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Phibro Animal Health's payments, as there could be some issues with sustaining them into the future. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Phibro Animal Health (of which 2 shouldn't be ignored!) you should know about. Is Phibro Animal Health not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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