looks like Australian Finance Group Limited (ASX:AFG) goes ex-dividend within the next four days. The ex-dividend date is one business day before the company's record date, which is the date on which the company determines which shareholders are entitled to receive the dividend. When buying or selling stocks, the ex-dividend date is important because it takes at least two business days for the trade to settle. This means you must purchase Australian Finance Group shares by March 7th to receive the dividend, which will be paid on March 25th.
The company's next dividend payment will be A$0.04 per share, following a total of A$0.08 paid to shareholders last year. Based on the last year's worth of payments, Australian Finance Group stock has a yield of approximately 5.5% on the current share price of A$1.455. We love to see companies pay dividends, but it's also important to make sure our golden goose doesn't die by laying golden eggs. So we need to investigate whether Australian Finance Group can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Australian Finance Group.
Dividends are usually paid out of a company's profits. If a company pays more in dividends than it earned in profit, then the dividend might become unsustainable. Australian Finance Group paid out more than half (73%) of its profit last year, which is a normal dividend rate for most companies.
Companies that pay out less in dividends than they earned in profit generally have more sustainable dividends. The lower the payout ratio, the more leeway a company has before being forced to cut its dividend.
Click here to see the company's payout ratio and analyst estimates of its future dividends.
Are profits and dividends growing?
Companies with declining profits are riskier for dividend shareholders. If profits decline significantly, the company may be forced to cut its dividend. Australian Finance Group's earnings per share have decreased by approximately 6.6% per year over the past five years. After all, as earnings per share decline, the size of the pie that can pay dividends shrinks.
Many investors assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Australian Finance Group has grown its dividend by an average of 7.3% per year, based on the past nine years of dividend payments. Increasing the payout ratio while profits are falling can yield significant temporary benefits, but it's always worth checking when the company can no longer increase the payout ratio . Because then the music will stop.
final point
Has Australian Finance Group gotten what it needs to maintain its dividend payments? At the same time as Australian Finance Group is paying out more than half of its profits as dividends to shareholders. We're not too keen on seeing the company's earnings slide. Australian Finance Group doesn't seem to be doing very well, so I wouldn't risk holding it for its dividend.
But with that in mind, if you're not put off by Australian Finance Group's poor dividend profile, it's worth being aware of the risks associated with this business. For example, we identified Two warning signs for Australian Finance Group (1 should not be ignored).
If you're in the market looking for high dividends, we recommend: Check out our selection of high-dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
