Alpha Financial Markets Consulting (LON:AFM) Could Be A Buy For Its Upcoming Dividend
Readers hoping to buy Alpha Financial Markets Consulting plc (LON:AFM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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 Alpha Financial Markets Consulting's shares on or after the 7th of September will not receive the dividend, which will be paid on the 19th of September.
The company's next dividend payment will be UK£0.10 per share, and in the last 12 months, the company paid a total of UK£0.14 per share. Based on the last year's worth of payments, Alpha Financial Markets Consulting stock has a trailing yield of around 4.1% on the current share price of £3.5. 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 Alpha Financial Markets Consulting has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Alpha Financial Markets Consulting
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 90% 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. It could become a concern if earnings started to decline. 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. It distributed 43% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Alpha Financial Markets Consulting's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Alpha Financial Markets Consulting has grown its earnings rapidly, up 23% a year for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past six years, Alpha Financial Markets Consulting has increased its dividend at approximately 30% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Is Alpha Financial Markets Consulting an attractive dividend stock, or better left on the shelf? We like Alpha Financial Markets Consulting's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Alpha Financial Markets Consulting looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Alpha Financial Markets Consulting for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Alpha Financial Markets Consulting and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.
