Yahoo Finance Is It Worth Considering Accent Group Limited (ASX:AX1) For Its Upcoming Dividend?
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Accent Group Limited (ASX:AX1) is about to go ex-dividend in just 4 days. You can purchase shares before the 4th of March in order to receive the dividend, which the company will pay on the 19th of March.
Accent Group's upcoming dividend is AU$0.052 a share, following on from the last 12 months, when the company distributed a total of AU$0.09 per share to shareholders. Based on the last year's worth of payments, Accent Group stock has a trailing yield of around 5.5% on the current share price of A$1.65. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Accent Group
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. Its dividend payout ratio is 88% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. 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. Over the last year it paid out 57% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Accent Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Accent Group's earnings per share have risen 17% per annum over the last five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we'd wonder why management are not reinvesting more in the business.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last ten years, Accent Group has lifted its dividend by approximately 20% 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.
To Sum It Up
Has Accent Group got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Accent Group is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
Wondering what the future holds for Accent Group? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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