Yahoo Finance Xerox Holdings (NASDAQ:XRX) Has Affirmed Its Dividend Of US$0.25
Xerox Holdings Corporation (NASDAQ:XRX) has announced that it will pay a dividend of US$0.25 per share on the 1st of August. Based on this payment, the dividend yield on the company's stock will be 6.3%, which is an attractive boost to shareholder returns.
See our latest analysis for Xerox Holdings
Xerox Holdings Might Find It Hard To Continue The Dividend
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even though Xerox Holdings isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Recent, EPS has fallen by 24.9%, so this could continue over the next year. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.
Xerox Holdings Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from US$0.68 in 2012 to the most recent annual payment of US$1.00. This implies that the company grew its distributions at a yearly rate of about 3.9% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Dividend Growth Potential Is Shaky
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 25% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Xerox Holdings' payments, as there could be some issues with sustaining them into the future. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think Xerox Holdings is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Xerox Holdings you should be aware of, and 1 of them is a bit concerning. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
