Yahoo Finance There's A Lot To Like About Autoliv's (NYSE:ALV) Upcoming US$0.64 Dividend
Autoliv, Inc. (NYSE:ALV) stock is about to trade ex-dividend in 2 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Autoliv's shares before the 26th of November in order to be eligible for the dividend, which will be paid on the 13th of December.
The company's next dividend payment will be US$0.64 per share, and in the last 12 months, the company paid a total of US$2.56 per share. Calculating the last year's worth of payments shows that Autoliv has a trailing yield of 2.4% on the current share price of $104.67. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Autoliv
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Autoliv is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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 22% of its free cash flow in the last year.
It's positive to see that Autoliv'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?
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. With that in mind, we're encouraged by the steady growth at Autoliv, with earnings per share up 2.4% on average over the last five years. Autoliv is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Autoliv has lifted its dividend by approximately 4.8% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Has Autoliv got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Autoliv 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. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Autoliv is halfway there. Autoliv looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Autoliv for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Autoliv and you should be aware of these before buying any 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. 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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