Read This Before Considering Andrews Sykes Group plc (LON:ASY) For Its Upcoming UK£0.119 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Andrews Sykes Group plc (LON:ASY) is about to trade ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Andrews Sykes Group's shares on or after the 2nd of October will not receive the dividend, which will be paid on the 31st of October.

The company's next dividend payment will be UK£0.119 per share, and in the last 12 months, the company paid a total of UK£0.26 per share. Calculating the last year's worth of payments shows that Andrews Sykes Group has a trailing yield of 4.8% on the current share price of UK£5.375. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Andrews Sykes Group has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Andrews Sykes Group paid out 63% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 75% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for Andrews Sykes Group

Click here to see how much of its profit Andrews Sykes Group paid out over the last 12 months.

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. This is why it's a relief to see Andrews Sykes Group earnings per share are up 2.9% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Andrews Sykes Group has increased its dividend at approximately 0.8% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Andrews Sykes Group? Earnings per share have been growing modestly and Andrews Sykes Group paid out a bit over half of its earnings and free cash flow last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

However if you're still interested in Andrews Sykes Group as a potential investment, you should definitely consider some of the risks involved with Andrews Sykes Group. For example - Andrews Sykes Group has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.