It looks like Alpha Financial Markets Consulting plc (LON: AFM) will go ex-dividend for the next 3 days. As a rule, the ex-dividend day is one business day before the record date on which a company determines the shareholders who are entitled to dividends. The ex-dividend date is important because it takes at least two business days to settle any time you buy or sell a stock. This means that investors who purchase Alpha Financial Markets Consulting’s shares on or after September 16 will not receive the dividend, which will be paid on September 30.
The company’s next dividend payment is £ 0.049 per share. Last year the company paid out a total of £ 0.097 to shareholders. Last year’s total dividend payments show Alpha Financial Markets Consulting achieved a trailing return of 2.7% on the current share price of £ 3.54. We love when companies pay a dividend, but it’s also important that laying the golden eggs doesn’t kill our golden goose! We have to see if the dividend is covered by profits and if it is growing.
Check out our latest analysis for Alpha Financial Markets Consulting
Dividends are usually paid out of company earnings. So when a company pays out more than it earned, there is usually a higher risk of its dividend being cut. Alpha Financial Markets Consulting paid an unsustainably high 121% of its profits to shareholders as dividends last year. Without more sustainable payment behavior, the dividend looks precarious. Still, cash flow is usually more important than profit for assessing the sustainability of the dividend. Hence, we should always check that the company has generated enough cash to pay its dividend. Good thing is that dividends were well covered by free cash flow, with the company paying out 10% of its cash flow last year.
It’s good to see that Alpha Financial Markets Consulting’s dividends, while not backed by profits, are affordable, at least from a cash perspective. However, if the company repeatedly paid a dividend in excess of its earnings, we would be concerned. Very few companies are able to sustainably pay dividends higher than their reported earnings.
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Click here to view the company’s payout ratio, as well as analyst estimates for its future dividends.
Have profits and dividends grown?
Companies with consistently growing earnings per share are generally the best dividend stocks because they usually find it easier to grow their dividend per share. If earnings plummet and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Because of this, it’s comforting to see Alpha Financial Markets Consulting’s revenues have skyrocketed 47% annually over the past five years.
Most investors judge a company’s dividend prospects primarily by its historical dividend growth rate. For the past four years, Alpha Financial Markets Consulting has increased its dividend by an average of around 35% per year. Both earnings per share and dividends have grown rapidly lately which is great to see.
Is it worth buying Alpha Financial Markets Consulting for its dividend? Earnings per share have increased positively, although despite the low cash flow payout ratio we are questioning why Alpha Financial Markets Consulting pays out so much of its profits. Overall, this isn’t a bad combination, but we believe there are likely more attractive dividend prospects out there.
However, while Alpha Financial Markets Consulting looks good from a dividend perspective, it’s always worth keeping up to date on the risks of this stock. As for the investment risks, We have identified 3 warning signs with Alpha Financial Markets Consulting and understanding them should be part of your investment process.
However, we wouldn’t recommend buying just the first dividend stock you see. Here’s a list of interesting dividend stocks with a yield greater than 2% and an upcoming dividend.
This article from Simply Wall St is of a general nature. We only provide comments based on historical data and analyst projections using an unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamentals. Note that our analysis may not take into account the latest company announcements or quality material, which may be sensitive to the price. Simply Wall St has no position in the stocks mentioned.
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