Accord Financial Corp. (TSE:ACD) is about to trade ex-dividend in the next 2 days. Ex-dividend means that investors that purchase the stock on or after the 14th of November will not receive this dividend, which will be paid on the 2nd of December.
Accord Financial’s next dividend payment will be CA$0.09 per share. Last year, in total, the company distributed CA$0.4 to shareholders. Looking at the last 12 months of distributions, Accord Financial has a trailing yield of approximately 4.0% on its current stock price of CA$9.1. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! As a result, readers should always check whether Accord Financial has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Accord Financial paid out a comfortable 27% of its profit last year. Accord Financial paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we’re glad to see Accord Financial’s earnings per share have risen 11% per annum over the last five years.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Accord Financial has delivered an average of 3.3% per year annual increase in its dividend, based on the past ten years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Accord Financial is keeping back more of its profits to grow the business.
To Sum It Up
Has Accord Financial got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly – this can sometimes signal management is focused on the long term future of the business. In summary, Accord Financial appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
Curious about whether Accord Financial has been able to consistently generate growth? Here’s a chart of its historical revenue and earnings growth.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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