Argent Industrial Limited (JSE:ART) is about to trade ex-dividend in the next three 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 two business day to settle. Meaning, you will need to purchase Argent Industrial's shares before the 18th of January to receive the dividend, which will be paid on the 23rd of January.
The company's next dividend payment will be R0.45 per share, and in the last 12 months, the company paid a total of R0.90 per share. Looking at the last 12 months of distributions, Argent Industrial has a trailing yield of approximately 6.0% on its current stock price of ZAR14.91. If you buy this business for its dividend, you should have an idea of whether Argent Industrial's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Argent Industrial
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. Argent Industrial is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Luckily it paid out just 18% of its free cash flow last year.
It's positive to see that Argent Industrial'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 how much of its profit Argent Industrial paid out over the last 12 months.
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. It's encouraging to see Argent Industrial has grown its earnings rapidly, up 41% a year for the past five years. Argent Industrial earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'