The Andersons, Inc. (NASDAQ:ANDE) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
The Andersons, Inc. (NASDAQ:ANDE) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Andersons' shares on or after the 28th of March, you won't be eligible to receive the dividend, when it is paid on the 22nd of April.
The company's next dividend payment will be US$0.19 per share. Last year, in total, the company distributed US$0.76 to shareholders. Looking at the last 12 months of distributions, Andersons has a trailing yield of approximately 1.4% on its current stock price of US$56.02. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Andersons
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Andersons is paying out just 25% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 3.2% of its free cash flow in the last year.
It's positive to see that Andersons'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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Andersons's earnings per share have been growing at 15% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Andersons has delivered an average of 5.9% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Andersons is keeping back more of its profits to grow the business.
Final Takeaway
From a dividend perspective, should investors buy or avoid Andersons? We love that Andersons is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Andersons for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Andersons that you should be aware of before investing in their shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.
