The board of Argo Investments Limited (ASX:ARG) has announced that it will pay a dividend on the 8th of March, with investors receiving A$0.165 per share. This payment means that the dividend yield will be 3.8%, which is around the industry average.
View our latest analysis for Argo Investments
Argo Investments Is Paying Out More Than It Is Earning
Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Looking forward, EPS could fall by 1.8% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 105%, which is definitely a bit high to be sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was A$0.265, compared to the most recent full-year payment of A$0.345. This means that it has been growing its distributions at 2.7% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Argo Investments' EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Argo Investments' Dividend Doesn't Look Great
Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Argo Investments that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
About ASX:ARG
Excellent balance sheet with questionable track record.
