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ANZ Group Holdings Limited (ASX:ANZ) is reducing its dividend to A$0.581 on the 1st of Julywhich is 30% less than last year's comparable payment of A$0.83. This means that the annual payment will be 5.7% of the current stock price, which is in line with the average for the industry.
We've discovered 1 warning sign about ANZ Group Holdings. View them for free.
ANZ Group Holdings' Payment Expected To Have Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
ANZ Group Holdings has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on ANZ Group Holdings' last earnings report, the payout ratio is at a decent 73%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Over the next 3 years, EPS is forecast to expand by 3.4%. Analysts forecast the future payout ratio could be 73% over the same time horizon, which is a number we think the company can maintain.
Check out our latest analysis for ANZ Group Holdings
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was A$1.78, compared to the most recent full-year payment of A$1.66. Payments have been decreasing at a very slow pace in this time period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
We Could See ANZ Group Holdings' Dividend Growing
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that ANZ Group Holdings has grown earnings per share at 6.6% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.
Our Thoughts On ANZ Group Holdings' Dividend
Even though the dividend was cut this year, we think ANZ Group Holdings has the ability to make consistent payments in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
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. For instance, we've picked out 1 warning sign for ANZ Group Holdings that investors should take into consideration. Is ANZ Group Holdings 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.