Yahoo Finance Booz Allen Hamilton Holding Corporation (NYSE:BAH) Passed Our Checks, And It's About To Pay A US$0.31 Dividend
Booz Allen Hamilton Holding Corporation (NYSE:BAH) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 13th of August, you won't be eligible to receive this dividend, when it is paid on the 28th of August.
Booz Allen Hamilton Holding's next dividend payment will be US$0.31 per share. Last year, in total, the company distributed US$1.24 to shareholders. Based on the last year's worth of payments, Booz Allen Hamilton Holding stock has a trailing yield of around 1.5% on the current share price of $84.67. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Booz Allen Hamilton Holding
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Booz Allen Hamilton Holding's payout ratio is modest, at just 32% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 30% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Booz Allen Hamilton Holding's earnings per share have been growing at 18% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past nine years, Booz Allen Hamilton Holding has increased its dividend at approximately 15% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Is Booz Allen Hamilton Holding an attractive dividend stock, or better left on the shelf? Booz Allen Hamilton Holding has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.
While it's tempting to invest in Booz Allen Hamilton Holding for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for Booz Allen Hamilton Holding you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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