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It looks like AMP Limited (ASX:AMP) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase AMP's shares before the 21st of August in order to receive the dividend, which the company will pay on the 27th of September.
The company's next dividend payment will be AU$0.02 per share, and in the last 12 months, the company paid a total of AU$0.04 per share. Calculating the last year's worth of payments shows that AMP has a trailing yield of 3.1% on the current share price of AU$1.31. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether AMP has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for AMP
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. AMP paid out 156% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
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. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see AMP has grown its earnings rapidly, up 23% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. AMP has seen its dividend decline 16% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.