Yahoo Finance Airtel Africa Plc (LON:AAF) Passed Our Checks, And It's About To Pay A US$0.025 Dividend
Airtel Africa Plc (LON:AAF) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Airtel Africa's shares before the 24th of June to receive the dividend, which will be paid on the 23rd of July.
The company's next dividend payment will be US$0.025 per share, and in the last 12 months, the company paid a total of US$0.04 per share. Based on the last year's worth of payments, Airtel Africa has a trailing yield of 3.6% on the current stock price of £0.803. If you buy this business for its dividend, you should have an idea of whether Airtel Africa's dividend is reliable and sustainable. As a result, readers should always check whether Airtel Africa has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Airtel Africa
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Airtel Africa paying out a modest 44% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 23% of its free cash flow in the last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 Airtel Africa's earnings have been skyrocketing, up 83% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Airtel Africa's dividend payments per share have declined at 18% per year on average over the past two years, which is uninspiring. Airtel Africa is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
Final Takeaway
Is Airtel Africa worth buying for its dividend? It's great that Airtel Africa is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Airtel Africa, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Airtel Africa is facing. For example - Airtel Africa has 2 warning signs we think you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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