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It looks like Auckland International Airport Limited (NZSE:AIA) is about to go ex-dividend in the next 4 days. You will need to purchase shares before the 3rd of October to receive the dividend, which will be paid on the 18th of October.
Auckland International Airport's next dividend payment will be NZ$0.1 per share. Last year, in total, the company distributed NZ$0.2 to shareholders. Last year's total dividend payments show that Auckland International Airport has a trailing yield of 2.4% on the current share price of NZ$9.265. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Auckland International Airport has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Auckland International Airport
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. Auckland International Airport is paying out an acceptable 51% of its profit, a common payout level among most companies. 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. Auckland International Airport paid out more free cash flow than it generated - 155%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Auckland International Airport paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Auckland International Airport's ability to maintain its dividend.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Auckland International Airport has grown its earnings rapidly, up 21% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.