Yahoo Finance Be Sure To Check Out The Aaron's Company, Inc. (NYSE:AAN) Before It Goes Ex-Dividend
It looks like The Aaron's Company, Inc. (NYSE:AAN) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Aaron's Company's shares before the 16th of June to receive the dividend, which will be paid on the 6th of July.
The upcoming dividend for Aaron's Company will put a total of US$0.10 per share in shareholders' pockets. If you buy this business for its dividend, you should have an idea of whether Aaron's Company's dividend is reliable and sustainable. So we need to investigate whether Aaron's Company can afford its dividend, and if the dividend could grow.
See our latest analysis for Aaron's Company
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. Aaron's Company is paying out just 3.6% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Aaron's Company generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 1.4% of its cash flow 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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Aaron's Company, with earnings per share up 7.6% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.
This is Aaron's Company's first year of paying a dividend, so it doesn't have much of a history yet to compare to.
The Bottom Line
Should investors buy Aaron's Company for the upcoming dividend? Earnings per share have been growing moderately, and Aaron's Company is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Aaron's Company is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Aaron's Company, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Aaron's Company is facing. To help with this, we've discovered 2 warning signs for Aaron's Company that you should be aware of before investing in their shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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