AMCON Distributing Company (NYSEMKT:DIT) Will Pay A US$5.00 Dividend In Four Days

It looks like AMCON Distributing Company (NYSEMKT:DIT) is about to go ex-dividend in the next four days. If you purchase the stock on or after the 31st of December, you won't be eligible to receive this dividend, when it is paid on the 12th of January.

AMCON Distributing's next dividend payment will be US$5.00 per share. Last year, in total, the company distributed US$5.72 to shareholders. Last year's total dividend payments show that AMCON Distributing has a trailing yield of 5.5% on the current share price of $104.02. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for AMCON Distributing

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AMCON Distributing is paying out just 7.3% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether AMCON Distributing 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 3.6% of its cash flow last year.

It's positive to see that AMCON Distributing's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit AMCON Distributing paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that AMCON Distributing's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, AMCON Distributing has lifted its dividend by approximately 23% a year on average.

To Sum It Up

Is AMCON Distributing an attractive dividend stock, or better left on the shelf? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

On that note, you'll want to research what risks AMCON Distributing is facing. Our analysis shows 4 warning signs for AMCON Distributing that we strongly recommend you have a look at before investing in the company.

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.

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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.
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