FlexiGroup Limited (ASX:FXL) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 6th of March, you won't be eligible to receive this dividend, when it is paid on the 14th of April.
FlexiGroup's next dividend payment will be AU$0.038 per share, and in the last 12 months, the company paid a total of AU$0.077 per share. Based on the last year's worth of payments, FlexiGroup stock has a trailing yield of around 5.0% on the current share price of A$1.535. If you buy this business for its dividend, you should have an idea of whether FlexiGroup's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. That's why it's good to see FlexiGroup paying out a modest 49% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see FlexiGroup's earnings per share have been shrinking at 3.6% a year over the previous 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 ten years, FlexiGroup has increased its dividend at approximately 2.5% a year on average.
Should investors buy FlexiGroup for the upcoming dividend? FlexiGroup's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. We're unconvinced on the company's merits, and think there might be better opportunities out there.
Curious what other investors think of FlexiGroup? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.