Yahoo Finance Xerox Holdings (NASDAQ:XRX) Has Affirmed Its Dividend Of $0.25
The board of Xerox Holdings Corporation (NASDAQ:XRX) has announced that it will pay a dividend on the 31st of July, with investors receiving $0.25 per share. This makes the dividend yield 7.3%, which will augment investor returns quite nicely.
Check out our latest analysis for Xerox Holdings
Xerox Holdings Doesn't Earn Enough To Cover Its Payments
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. While Xerox Holdings is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
The next 12 months is set to see EPS grow by 116.9%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.
Xerox Holdings Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was $0.92, compared to the most recent full-year payment of $1.00. Its dividends have grown at less than 1% per annum over this time frame. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Earnings per share has been sinking by 47% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Our Thoughts On Xerox Holdings' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Xerox Holdings has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Xerox Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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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