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It looks like Academy Sports and Outdoors, Inc. (NASDAQ:ASO) 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 of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. This means that investors who purchase Academy Sports and Outdoors' shares on or after the 25th of March will not receive the dividend, which will be paid on the 17th of April.
The company's next dividend payment will be US$0.13 per share. Last year, in total, the company distributed US$0.44 to shareholders. Last year's total dividend payments show that Academy Sports and Outdoors has a trailing yield of 0.9% on the current share price of US$47.57. If you buy this business for its dividend, you should have an idea of whether Academy Sports and Outdoors's dividend is reliable and sustainable. So we need to investigate whether Academy Sports and Outdoors can afford its dividend, and if the dividend could grow.
View our latest analysis for Academy Sports and Outdoors
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. Academy Sports and Outdoors is paying out just 7.0% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Academy Sports and Outdoors generated enough free cash flow to afford its dividend. It paid out 7.1% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Academy Sports and Outdoors'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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Academy Sports and Outdoors's earnings have been skyrocketing, up 86% per annum for the past five years. Academy Sports and Outdoors looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.