Only Four Days Left To Cash In On FFI Holdings' (ASX:FFI) Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that FFI Holdings Limited (ASX:FFI) is about to go ex-dividend in just four days. This means that investors who purchase shares on or after the 15th of March will not receive the dividend, which will be paid on the 26th of March.

FFI Holdings's next dividend payment will be AU$0.12 per share, and in the last 12 months, the company paid a total of AU$0.25 per share. Based on the last year's worth of payments, FFI Holdings has a trailing yield of 4.1% on the current stock price of A$6.1. If you buy this business for its dividend, you should have an idea of whether FFI Holdings's dividend is reliable and sustainable. So we need to investigate whether FFI Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for FFI Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. FFI Holdings paid out more than half (71%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out an unsustainably high 586% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.

While FFI Holdings's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were FFI Holdings to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit FFI Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at FFI Holdings, with earnings per share up 9.2% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. FFI Holdings's dividend payments are broadly unchanged compared to where they were 10 years ago.

The Bottom Line

Is FFI Holdings an attractive dividend stock, or better left on the shelf? FFI Holdings is paying out a reasonable percentage of its income and an uncomfortably high 586% of its cash flow as dividends. At least earnings per share have been growing steadily. It's not that we think FFI Holdings is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in FFI Holdings despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 2 warning signs for FFI Holdings that we recommend you consider before investing in the business.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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