Yahoo Finance Why It Might Not Make Sense To Buy Accord Financial Corp. (TSE:ACD) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Accord Financial Corp. (TSE:ACD) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 13th of August to receive the dividend, which will be paid on the 1st of September.
Accord Financial's next dividend payment will be CA$0.05 per share. Last year, in total, the company distributed CA$0.20 to shareholders. Looking at the last 12 months of distributions, Accord Financial has a trailing yield of approximately 3.2% on its current stock price of CA$6.19. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Accord Financial can afford its dividend, and if the dividend could grow.
See our latest analysis for Accord Financial
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. Last year, Accord Financial paid out 261% of its profit to shareholders in the form of dividends. This is not sustainable behaviour and requires a closer look on behalf of the purchaser.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
Click here to see how much of its profit Accord Financial paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Accord Financial's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 32% a year over the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Accord Financial's dividend payments per share have declined at 2.6% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
To Sum It Up
Has Accord Financial got what it takes to maintain its dividend payments? Not only are earnings per share shrinking, but Accord Financial is paying out a disconcertingly high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Accord Financial. Every company has risks, and we've spotted 6 warning signs for Accord Financial (of which 2 are a bit unpleasant!) you should know about.
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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