In This Article:
Readers hoping to buy AMCIL Limited (ASX:AMH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. Accordingly, AMCIL investors that purchase the stock on or after the 6th of August will not receive the dividend, which will be paid on the 28th of August.
The company's upcoming dividend is AU$0.03 a share, following on from the last 12 months, when the company distributed a total of AU$0.035 per share to shareholders. Last year's total dividend payments show that AMCIL has a trailing yield of 3.1% on the current share price of AU$1.145. If you buy this business for its dividend, you should have an idea of whether AMCIL's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for AMCIL
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year AMCIL paid out 94% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Click here to see how much of its profit AMCIL paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about AMCIL's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, AMCIL has lifted its dividend by approximately 3.4% a year on average.
Final Takeaway
Has AMCIL got what it takes to maintain its dividend payments? Earnings per share have not grown at all and AMCIL is paying out an uncomfortably high percentage of its profit as dividends. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.