ADT (NYSE:ADT) Has Affirmed Its Dividend Of $0.035
ADT Inc. (NYSE:ADT) has announced that it will pay a dividend of $0.035 per share on the 4th of October. This means that the annual payment will be 2.1% of the current stock price, which is in line with the average for the industry.
See our latest analysis for ADT
ADT Is Paying Out More Than It Is Earning
We aren't too impressed by dividend yields unless they can be sustained over time. Even though ADT isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
Over the next year, EPS is forecast to grow rapidly. If recent patterns in the dividend continues, we would start to get a bit worried, with the payout ratio possibly reaching 129%.
ADT Doesn't Have A Long Payment History
ADT's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. There hasn't been much of a change in the dividend over the last 5 years. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
The Company Could Face Some Challenges Growing The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. ADT has seen EPS rising for the last five years, at 14% per annum. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.
Our Thoughts On ADT's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about ADT's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think ADT is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for ADT that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
