Stock Analysis

It Might Not Be A Great Idea To Buy Advanced Share Registry Limited (ASX:ASW) For Its Next Dividend

ASX:ASW
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Readers hoping to buy Advanced Share Registry Limited (ASX:ASW) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 3rd of February in order to receive the dividend, which the company will pay on the 8th of February.

Advanced Share Registry's upcoming dividend is AU$0.025 a share, following on from the last 12 months, when the company distributed a total of AU$0.041 per share to shareholders. Last year's total dividend payments show that Advanced Share Registry has a trailing yield of 5.3% on the current share price of A$0.85. 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.

Check out our latest analysis for Advanced Share Registry

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 116% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.

Click here to see how much of its profit Advanced Share Registry paid out over the last 12 months.

historic-dividend
ASX:ASW Historic Dividend January 30th 2021

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Advanced Share Registry's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Advanced Share Registry has increased its dividend at approximately 2.0% a year on average.

The Bottom Line

Has Advanced Share Registry got what it takes to maintain its dividend payments? While we're glad to see that its earnings aren't shrinking, we're not enamored of the fact that it's paying out 116% of last year's earnings. 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.

So if you're still interested in Advanced Share Registry despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For instance, we've identified 4 warning signs for Advanced Share Registry (1 can't be ignored) you should be aware of.

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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