Readers hoping to buy British & American Investment Trust PLC (LON:BAF) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase British & American Investment Trust's shares on or after the 8th of December will not receive the dividend, which will be paid on the 22nd of December.
The company's next dividend payment will be UK£0.018 per share. Last year, in total, the company distributed UK£0.035 to shareholders. Last year's total dividend payments show that British & American Investment Trust has a trailing yield of 8.0% on the current share price of £0.32. 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 British & American Investment Trust has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. British & American Investment Trust lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. British & American Investment Trust paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. British & American Investment Trust was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. British & American Investment Trust has seen its dividend decline 10% per annum on average over the past 10 years, which is not great to see.
Remember, you can always get a snapshot of British & American Investment Trust's financial health, by checking our visualisation of its financial health, here.
Has British & American Investment Trust got what it takes to maintain its dividend payments? We're uncomfortable with the fact that British & American Investment Trust paid a dividend while being loss-making. It doesn't appear an outstanding opportunity, but could be worth a closer look.
If you're not too concerned about British & American Investment Trust's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 4 warning signs for British & American Investment Trust 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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