Four Days Left To Buy Anpario plc (LON:ANP) Before The Ex-Dividend Date

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Anpario plc (LON:ANP) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Anpario investors that purchase the stock on or after the 14th of November will not receive the dividend, which will be paid on the 29th of November.

The company's next dividend payment will be UK£0.0325 per share. Last year, in total, the company distributed UK£0.11 to shareholders. Based on the last year's worth of payments, Anpario stock has a trailing yield of around 3.2% on the current share price of UK£3.35. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Anpario has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Anpario

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. Anpario paid out 60% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Anpario generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 22% of its cash flow last 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?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Anpario's 5.3% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

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, Anpario has increased its dividend at approximately 12% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

To Sum It Up

From a dividend perspective, should investors buy or avoid Anpario? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. 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 Anpario as a potential investment, you should definitely consider some of the risks involved with Anpario. For instance, we've identified 4 warning signs for Anpario (1 is a bit concerning) you should be aware of.

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.