Why You Might Be Interested In Alpha Financial Markets Consulting plc (LON:AFM) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Alpha Financial Markets Consulting plc (LON:AFM) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Alpha Financial Markets Consulting's shares before the 7th of September in order to receive the dividend, which the company will pay on the 19th of September.

The company's next dividend payment will be UK£0.10 per share. Last year, in total, the company distributed UK£0.14 to shareholders. Last year's total dividend payments show that Alpha Financial Markets Consulting has a trailing yield of 4.1% on the current share price of £3.5. If you buy this business for its dividend, you should have an idea of whether Alpha Financial Markets Consulting's dividend is reliable and sustainable. As a result, readers should always check whether Alpha Financial Markets Consulting has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Alpha Financial Markets Consulting

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. It paid out 90% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. 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. Fortunately, it paid out only 43% of its free cash flow in the past year.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Alpha Financial Markets Consulting has grown its earnings rapidly, up 23% a year for the past five years. The company is paying out more than three-quarters of its earnings, but it is also generating strong earnings growth.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last six years, Alpha Financial Markets Consulting has lifted its dividend by approximately 30% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Alpha Financial Markets Consulting worth buying for its dividend? We like Alpha Financial Markets Consulting's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Alpha Financial Markets Consulting looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Alpha Financial Markets Consulting for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Alpha Financial Markets Consulting you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.