U.S. Markets open in 8 hrs 13 mins
  • S&P Futures

    3,636.25
    +3.50 (+0.10%)
     
  • Dow Futures

    30,004.00
    +6.00 (+0.02%)
     
  • Nasdaq Futures

    12,116.50
    +40.50 (+0.34%)
     
  • Russell 2000 Futures

    1,853.80
    +2.30 (+0.12%)
     
  • Crude Oil

    45.13
    +0.22 (+0.49%)
     
  • Gold

    1,800.70
    -3.90 (-0.22%)
     
  • Silver

    23.16
    -0.14 (-0.62%)
     
  • EUR/USD

    1.1905
    +0.0008 (+0.0714%)
     
  • 10-Yr Bond

    0.8820
    0.0000 (0.00%)
     
  • Vix

    21.64
    -1.02 (-4.50%)
     
  • GBP/USD

    1.3342
    -0.0016 (-0.1214%)
     
  • USD/JPY

    104.5000
    +0.0200 (+0.0191%)
     
  • BTC-USD

    18,877.85
    -190.64 (-1.00%)
     
  • CMC Crypto 200

    374.47
    +4.72 (+1.28%)
     
  • FTSE 100

    6,432.17
    +98.33 (+1.55%)
     
  • Nikkei 225

    26,314.69
    +149.10 (+0.57%)
     

Do These 3 Checks Before Buying Australian Pharmaceutical Industries Limited (ASX:API) For Its Upcoming Dividend

Simply Wall St
·3 min read

It looks like Australian Pharmaceutical Industries Limited (ASX:API) is about to go ex-dividend in the next four days. You will need to purchase shares before the 11th of November to receive the dividend, which will be paid on the 15th of December.

Australian Pharmaceutical Industries's next dividend payment will be AU$0.02 per share, and in the last 12 months, the company paid a total of AU$0.02 per share. Based on the last year's worth of payments, Australian Pharmaceutical Industries has a trailing yield of 1.8% on the current stock price of A$1.115. If you buy this business for its dividend, you should have an idea of whether Australian Pharmaceutical Industries's dividend is reliable and sustainable. As a result, readers should always check whether Australian Pharmaceutical Industries has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Australian Pharmaceutical Industries

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. Australian Pharmaceutical Industries reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Luckily it paid out just 11% of its free cash flow last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Australian Pharmaceutical Industries was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Australian Pharmaceutical Industries's dividend payments are broadly unchanged compared to where they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Get our latest analysis on Australian Pharmaceutical Industries's balance sheet health here.

The Bottom Line

Should investors buy Australian Pharmaceutical Industries for the upcoming dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." Bottom line: Australian Pharmaceutical Industries has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Curious what other investors think of Australian Pharmaceutical Industries? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.

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