Algoma Steel Group (NASDAQ:ASTL) Has Announced A Dividend Of CA$0.05

Algoma Steel Group Inc.'s (NASDAQ:ASTL) investors are due to receive a payment of CA$0.05 per share on 24th of July. This means that the annual payment will be 2.8% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Algoma Steel Group

Algoma Steel Group's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Algoma Steel Group was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 28.8% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 9.7%, which is comfortable for the company to continue in the future.

Algoma Steel Group Doesn't Have A Long Payment History

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Algoma Steel Group has seen EPS rising for the last five years, at 111% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

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. While Algoma Steel Group is earning enough to cover the payments, the cash flows are lacking. We don't think Algoma Steel Group is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Algoma Steel Group (of which 2 make us uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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