Is It Worth Considering Alexander Forbes Group Holdings Limited (JSE:AFH) For Its Upcoming Dividend?

Alexander Forbes Group Holdings Limited (JSE:AFH) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Alexander Forbes Group Holdings' shares on or after the 17th of July, you won't be eligible to receive the dividend, when it is paid on the 22nd of July.

The company's upcoming dividend is R00.90 a share, following on from the last 12 months, when the company distributed a total of R0.50 per share to shareholders. Based on the last year's worth of payments, Alexander Forbes Group Holdings stock has a trailing yield of around 6.8% on the current share price of R07.31. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Alexander Forbes Group Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Alexander Forbes Group Holdings paid out 110% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

Click here to see how much of its profit Alexander Forbes Group Holdings paid out over the last 12 months.

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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Alexander Forbes Group Holdings's earnings per share have risen 16% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past nine years, Alexander Forbes Group Holdings has increased its dividend at approximately 17% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

From a dividend perspective, should investors buy or avoid Alexander Forbes Group Holdings? We're not enthused to see Alexander Forbes Group Holdings's dividend was not well covered by earnings over the last year, although it is great to see earnings growing. It doesn't appear an outstanding opportunity, but could be worth a closer look.

With that being said, if dividends aren't your biggest concern with Alexander Forbes Group Holdings, you should know about the other risks facing this business. Our analysis shows 2 warning signs for Alexander Forbes Group Holdings and you should be aware of these before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.

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