There's A Lot To Like About Albertsons Companies' (NYSE:ACI) Upcoming US$0.10 Dividend

By
Simply Wall St
Published
January 21, 2021
NYSE:ACI
Source: Shutterstock

It looks like Albertsons Companies, Inc. (NYSE:ACI) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 25th of January will not receive this dividend, which will be paid on the 10th of February.

Albertsons Companies's next dividend payment will be US$0.10 per share. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Albertsons Companies has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Albertsons Companies

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Albertsons Companies is paying out just 5.4% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 4.1% of its free cash flow in the 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.

historic-dividend
NYSE:ACI Historic Dividend January 21st 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 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 not encouraging to see that Albertsons Companies's earnings are effectively flat over the past three years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Albertsons Companies is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

This is Albertsons Companies's first year of paying a dividend, so it doesn't have much of a history yet to compare to.

Final Takeaway

Has Albertsons Companies got what it takes to maintain its dividend payments? Earnings per share have been flat over this time, but we're intrigued to see that Albertsons Companies is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. Generally we like to see both low payout ratios and strong earnings per share growth, but Albertsons Companies is halfway there. Overall we think this is an attractive combination and worthy of further research.

So while Albertsons Companies looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Albertsons Companies is showing 4 warning signs in our investment analysis, and 1 of those is a bit concerning...

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.

When trading Albertsons Companies or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.