Yahoo Finance There's A Lot To Like About AmerisourceBergen's (NYSE:ABC) Upcoming US$0.48 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see AmerisourceBergen Corporation (NYSE:ABC) is about to trade 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 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. In other words, investors can purchase AmerisourceBergen's shares before the 11th of May in order to be eligible for the dividend, which will be paid on the 30th of May.
The company's next dividend payment will be US$0.48 per share, on the back of last year when the company paid a total of US$1.94 to shareholders. Based on the last year's worth of payments, AmerisourceBergen stock has a trailing yield of around 1.2% on the current share price of $167.99. 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 AmerisourceBergen can afford its dividend, and if the dividend could grow.
View our latest analysis for AmerisourceBergen
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AmerisourceBergen is paying out just 24% 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 AmerisourceBergen generated enough free cash flow to afford its dividend. The good news is it paid out just 16% of its free cash flow in the last year.
It's positive to see that AmerisourceBergen's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see AmerisourceBergen's earnings have been skyrocketing, up 37% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, AmerisourceBergen looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, AmerisourceBergen has lifted its dividend by approximately 14% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
From a dividend perspective, should investors buy or avoid AmerisourceBergen? We love that AmerisourceBergen is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about AmerisourceBergen, and we would prioritise taking a closer look at it.
In light of that, while AmerisourceBergen has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for AmerisourceBergen that we recommend you consider before investing in the business.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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