ADT (NYSE:ADT) Is Due To Pay A Dividend Of $0.035

The board of ADT Inc. (NYSE:ADT) has announced that it will pay a dividend on the 4th of October, with investors receiving $0.035 per share. Based on this payment, the dividend yield will be 2.1%, which is fairly typical for the industry.

Check out our latest analysis for ADT

ADT Is Paying Out More Than It Is Earning

We aren't too impressed by dividend yields unless they can be sustained over time. Even though ADT isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 129%, which is unsustainable.

ADT Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The payments haven't really changed that much since 5 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Company Could Face Some Challenges Growing The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that ADT has grown earnings per share at 14% per year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

Our Thoughts On ADT's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for ADT that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.