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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Argentex Group Plc (LON:AGFX) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Argentex Group's shares before the 12th of August to receive the dividend, which will be paid on the 13th of September.
The company's next dividend payment will be UK£0.02 per share, and in the last 12 months, the company paid a total of UK£0.02 per share. Calculating the last year's worth of payments shows that Argentex Group has a trailing yield of 2.1% on the current share price of £0.95. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Argentex Group paid out a comfortable 38% of its profit last year.
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?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. From this perspective, we're disturbed to see earnings per share plunged 27% over the last 12 months, and we'd wonder if the company has had some kind of major event that has skewed the calculation.
Given that Argentex Group has only been paying a dividend for a year, there's not much of a past history to draw insight from.
Has Argentex Group got what it takes to maintain its dividend payments? Argentex Group's earnings per share have declined over the past 12 months, although we note that it is paying out a low fraction of its earnings. Ordinarily we wouldn't be too concerned about a one-year decline, especially given the payout ratio is low. This makes us wonder if the company is incurring costs by reinvesting in its business. Ordinarily we wouldn't be too concerned about a one-year decline, but the -27% drop in earnings per share is enough to make us think twice. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
If you're not too concerned about Argentex Group's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. In terms of investment risks, we've identified 2 warning signs with Argentex Group and understanding them should be part of your investment process.
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.
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