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Applied Industrial Technologies, Inc. (NYSE:AIT) stock is about to trade ex-dividend in 4 days. Ex-dividend means that investors that purchase the stock on or after the 12th of February will not receive this dividend, which will be paid on the 26th of February.
Applied Industrial Technologies's next dividend payment will be US$0.33 per share. Last year, in total, the company distributed US$1.32 to shareholders. Last year's total dividend payments show that Applied Industrial Technologies has a trailing yield of 1.7% on the current share price of $78.85. If you buy this business for its dividend, you should have an idea of whether Applied Industrial Technologies's dividend is reliable and sustainable. So we need to investigate whether Applied Industrial Technologies can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Applied Industrial Technologies
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. Applied Industrial Technologies's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Applied Industrial Technologies didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 15% of its free cash flow as dividends last year, which is conservatively low.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Applied Industrial Technologies was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Applied Industrial Technologies has delivered 8.2% dividend growth per year on average over the past 10 years.
Get our latest analysis on Applied Industrial Technologies's balance sheet health here.