Australian Finance Group Limited (ASX:AFG) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 6th of September, you won't be eligible to receive this dividend, when it is paid on the 3rd of October.
Australian Finance Group's next dividend payment will be AU$0.059 per share, on the back of last year when the company paid a total of AU$0.11 to shareholders. Calculating the last year's worth of payments shows that Australian Finance Group has a trailing yield of 4.7% on the current share price of A$2.25. 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 typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Australian Finance Group is paying out an acceptable 69% of its profit, a common payout level among most companies.
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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Australian Finance Group's earnings per share have been growing at 12% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Australian Finance Group has delivered 26% dividend growth per year on average over the past 4 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is Australian Finance Group worth buying for its dividend? Earnings per share are growing at an attractive rate, and Australian Finance Group is paying out a bit over half its profits. Overall, Australian Finance Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Wondering what the future holds for Australian Finance Group? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.