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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Andrews Sykes Group plc (LON:ASY) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days 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. Meaning, you will need to purchase Andrews Sykes Group's shares before the 22nd of May to receive the dividend, which will be paid on the 20th of June.
The company's next dividend payment will be UK£0.14 per share. Last year, in total, the company distributed UK£0.26 to shareholders. Based on the last year's worth of payments, Andrews Sykes Group has a trailing yield of 4.9% on the current stock price of UK£5.275. 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 Andrews Sykes Group has been able to grow its dividends, or if the dividend might be cut.
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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. Andrews Sykes Group paid out more than half (65%) of its earnings last year, which is a regular payout ratio for 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. Over the last year it paid out 73% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Andrews Sykes 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.
See our latest analysis for Andrews Sykes Group
Click here to see how much of its profit Andrews Sykes Group paid out over the last 12 months.
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. This is why it's a relief to see Andrews Sykes Group earnings per share are up 2.4% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.