Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see AstroNova, Inc. (NASDAQ:ALOT) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 25th of March in order to receive the dividend, which the company will pay on the 2nd of April.
AstroNova’s next dividend payment will be US$0.07 per share, on the back of last year when the company paid a total of US$0.28 to shareholders. Based on the last year’s worth of payments, AstroNova has a trailing yield of 3.6% on the current stock price of $7.81. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether AstroNova can afford its dividend, and if the dividend could grow.
See our latest analysis for AstroNova
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. AstroNova distributed an unsustainably high 112% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. AstroNova 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.
Click here to see how much of its profit AstroNova paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we’re concerned to see AstroNova’s earnings per share have dropped 16% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the last ten years, AstroNova has lifted its dividend by approximately 1.6% a year on average.
To Sum It Up
Is AstroNova worth buying for its dividend? Earnings per share are in decline and AstroNova is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It’s not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. All things considered, we’re not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Although, if you’re still interested in AstroNova and want to know more, you’ll find it very useful to know what risks this stock faces. To help with this, we’ve discovered 5 warning signs for AstroNova that you should be aware of before investing in their shares.
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 editorial-team@simplywallst.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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.