Yahoo Finance Four Days Left To Buy Aurizon Holdings Limited (ASX:AZJ) Before The Ex-Dividend Date
Aurizon Holdings Limited (ASX:AZJ) is about to trade ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 24th of August will not receive this dividend, which will be paid on the 21st of September.
Aurizon Holdings's next dividend payment will be AU$0.14 per share, and in the last 12 months, the company paid a total of AU$0.27 per share. Looking at the last 12 months of distributions, Aurizon Holdings has a trailing yield of approximately 5.9% on its current stock price of A$4.61. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Aurizon 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. It paid out 88% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 71% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
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?
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Aurizon Holdings's earnings per share have remained effectively flat over the past five 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. A payout ratio of 88% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, Aurizon Holdings has lifted its dividend by approximately 25% a year on average.
To Sum It Up
Is Aurizon Holdings worth buying for its dividend? Earnings per share have barely grown, and although Aurizon Holdings paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
However if you're still interested in Aurizon Holdings as a potential investment, you should definitely consider some of the risks involved with Aurizon Holdings. For example, Aurizon Holdings has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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