Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that American Airlines Group Inc. (NASDAQ:AAL) is about to go ex-dividend in just 4 days. You can purchase shares before the 4th of February in order to receive the dividend, which the company will pay on the 19th of February.
American Airlines Group’s upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Based on the last year’s worth of payments, American Airlines Group has a trailing yield of 1.5% on the current stock price of $26.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. American Airlines Group paid out just 11% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. American Airlines Group paid a dividend despite reporting negative free cash flow last year. That’s typically a bad combination and – if this were more than a one-off – not sustainable.
Have Earnings And Dividends Been Growing?
Companies that aren’t growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we’re not overly excited about American Airlines Group’s flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. American Airlines Group’s dividend payments are effectively flat on where they were six years ago.
To Sum It Up
Is American Airlines Group an attractive dividend stock, or better left on the shelf? American Airlines Group’s earnings per share have not grown at all in recent years, although we like that it is paying out a low percentage of its earnings. Overall, American Airlines Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Ever wonder what the future holds for American Airlines Group? See what the 16 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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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