AXIS Capital Holdings Limited (NYSE:AXS) stock is about to trade ex-dividend in 3 days time. You can purchase shares before the 30th of March in order to receive the dividend, which the company will pay on the 15th of April.
AXIS Capital Holdings's next dividend payment will be US$0.41 per share. Last year, in total, the company distributed US$1.64 to shareholders. Calculating the last year's worth of payments shows that AXIS Capital Holdings has a trailing yield of 4.4% on the current share price of $37.64. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether AXIS Capital Holdings has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately AXIS Capital Holdings's payout ratio is modest, at just 48% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see AXIS Capital Holdings's earnings per share have dropped 15% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. AXIS Capital Holdings has delivered 7.4% dividend growth per year on average over the past ten years.
Should investors buy AXIS Capital Holdings for the upcoming dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
However if you're still interested in AXIS Capital Holdings as a potential investment, you should definitely consider some of the risks involved with AXIS Capital Holdings. Every company has risks, and we've spotted 1 warning sign for AXIS Capital Holdings you should know about.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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