Auswide Bank Ltd (ASX:ABA) stock is about to trade ex-dividend in 4 days. You can purchase shares before the 4th of March in order to receive the dividend, which the company will pay on the 19th of March.
Auswide Bank's upcoming dividend is AU$0.19 a share, following on from the last 12 months, when the company distributed a total of AU$0.30 per share to shareholders. Calculating the last year's worth of payments shows that Auswide Bank has a trailing yield of 4.6% on the current share price of A$6.46. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. Auswide Bank is paying out an acceptable 61% of its profit, a common payout level among most companies.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Auswide Bank, with earnings per share up 6.8% on average 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. Auswide Bank has seen its dividend decline 7.2% per annum on average over the past 10 years, which is not great to see. Auswide Bank is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
From a dividend perspective, should investors buy or avoid Auswide Bank? Auswide Bank has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
However if you're still interested in Auswide Bank as a potential investment, you should definitely consider some of the risks involved with Auswide Bank. Our analysis shows 1 warning sign for Auswide Bank and you should be aware of it before buying any 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.
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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. 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.
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