Yahoo Finance Should Income Investors Look At Altus Group Limited (TSE:AIF) Before Its Ex-Dividend?
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Altus Group Limited (TSE:AIF) is about to go ex-dividend in just 3 days. Ex-dividend means that investors that purchase the stock on or after the 30th of March will not receive this dividend, which will be paid on the 15th of April.
Altus Group's upcoming dividend is CA$0.15 a share, following on from the last 12 months, when the company distributed a total of CA$0.60 per share to shareholders. Based on the last year's worth of payments, Altus Group stock has a trailing yield of around 1.6% on the current share price of CA$38.18. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Altus Group can afford its dividend, and if the dividend could grow.
View our latest analysis for Altus Group
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. Altus Group distributed an unsustainably high 130% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. 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. It distributed 41% of its free cash flow as dividends, a comfortable payout level for most companies.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Altus Group fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Altus Group's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Altus Group's dividend payments per share have declined at 6.7% per year on average over the past ten years, which is uninspiring.
Final Takeaway
Is Altus Group worth buying for its dividend? Altus Group's earnings per share are effectively flat, and it is paying out just 41% of its cash flow but 130% of its income. In summary, while it has some positive characteristics, we're not inclined to race out and buy Altus Group today.
With that being said, if dividends aren't your biggest concern with Altus Group, you should know about the other risks facing this business. Every company has risks, and we've spotted 1 warning sign for Altus Group you should know about.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
