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AMCON Distributing Company (NYSEMKT:DIT) Is About To Go Ex-Dividend, And It Pays A 1.6% Yield

Simply Wall St
·3 min read

Readers hoping to buy AMCON Distributing Company (NYSEMKT:DIT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 5th of November will not receive this dividend, which will be paid on the 1st of December.

AMCON Distributing's upcoming dividend is US$0.18 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Looking at the last 12 months of distributions, AMCON Distributing has a trailing yield of approximately 1.6% on its current stock price of $64.04. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether AMCON Distributing has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for AMCON Distributing

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AMCON Distributing paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether AMCON Distributing generated enough free cash flow to afford its dividend. AMCON Distributing paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see how much of its profit AMCON Distributing paid out over the last 12 months.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by AMCON Distributing's 11% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. AMCON Distributing has delivered 3.3% dividend growth per year on average over the past 10 years.

To Sum It Up

Is AMCON Distributing an attractive dividend stock, or better left on the shelf? AMCON Distributing's earnings per share have fallen noticeably and, although it paid out less than half its profit as dividends last year, it paid out a disconcertingly high percentage of its cashflow, which is not a great combination. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of AMCON Distributing.

So if you're still interested in AMCON Distributing despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 5 warning signs for AMCON Distributing (of which 2 are concerning!) you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top 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.