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Amdocs Limited (NASDAQ:DOX) stock is about to trade ex-dividend in four 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Amdocs' shares before the 28th of September in order to receive the dividend, which the company will pay on the 27th of October.
The company's next dividend payment will be US$0.43 per share, on the back of last year when the company paid a total of US$1.74 to shareholders. Last year's total dividend payments show that Amdocs has a trailing yield of 2.0% on the current share price of $85.7. If you buy this business for its dividend, you should have an idea of whether Amdocs's dividend is reliable and sustainable. As a result, readers should always check whether Amdocs has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Amdocs
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Amdocs's payout ratio is modest, at just 35% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 33% of its free cash flow in the past year.
It's positive to see that Amdocs'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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Amdocs, with earnings per share up 9.8% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.