Advanced Share Registry Limited (ASX:ASW) is about to trade ex-dividend in the next 2 days. If you purchase the stock on or after the 4th of February, you won’t be eligible to receive this dividend, when it is paid on the 7th of February.
Advanced Share Registry’s upcoming dividend is AU$0.021 a share, following on from the last 12 months, when the company distributed a total of AU$0.04 per share to shareholders. Last year’s total dividend payments show that Advanced Share Registry has a trailing yield of 5.8% on the current share price of A$0.69. If you buy this business for its dividend, you should have an idea of whether Advanced Share Registry’s dividend is reliable and sustainable. So we need to investigate whether Advanced Share Registry can afford its dividend, and if the dividend could grow.
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. Advanced Share Registry distributed an unsustainably high 115% of its profit as dividends to shareholders last year. Without extenuating circumstances, we’d consider the dividend at risk of a cut.
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.
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 fall far enough, the company could be forced to cut its dividend. It’s not encouraging to see that Advanced Share Registry’s earnings are effectively flat 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.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Advanced Share Registry has delivered 7.2% dividend growth per year on average over the past ten years.
Should investors buy Advanced Share Registry for the upcoming dividend? Advanced Share Registry has an uncomfortably high payout ratio, and its earnings have not grown at all. Advanced Share Registry doesn’t appear to have a lot going for it, and we’re not inclined to take a risk on owning it for the dividend.
Want to learn more about Advanced Share Registry’s dividend performance? Check out this visualisation 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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