How safe is the Astrazeneca dividend payment (LON:AZN)?

Astrazeneca (LON:AZN) is a large cap Pharmaceuticals operator focused on the discovery and development of products, which are then manufactured, marketed and sold.

For the nine months ended 30 September 2019, AstraZeneca plc revenues increased 13% to $17.72B but net income decreased 9% to $1.02B. The group pays out an attractive rolling dividend yield of 2.79%, which is forecast to rise by 1.19% over the next year.

I'd like to know how safe Astrazeneca's dividend is. Dividend cover (earnings per share divided by dividend per share) of two times or above is strong. Anything below one and a half times suggests we need to look a little closer.

Computing Astrazeneca's dividend cover ratio

Poor dividend cover means that a small decline in earnings could consign your dividend payment to the scrap heap. It could also mean that the company is forgoing profitable investment opportunities that could generate future earnings growth. With that in mind, let’s take a look at Astrazeneca dividend cover.

We can get all the information we need to see if Astrazeneca has an adequate level of dividend cover from the group’s StockReport. The group’s trailing twelve month (TTM) EPS is $1.61 and its TTM dividend per share is $2.79. 

Divide the former by the latter and we get a trailing twelve-month dividend cover for Astrazeneca of 0.58. This is below the 1.5 times cover limit that marks the point at which we should do some further digging on dividend sustainability and safety.

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