Booz Allen Hamilton Holding Corporation (NYSE:BAH) Is About To Go Ex-Dividend, And It Pays A 1.5% Yield
Booz Allen Hamilton Holding Corporation (NYSE:BAH) is about to trade ex-dividend in the next four 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. Thus, you can purchase Booz Allen Hamilton Holding's shares before the 14th of August in order to receive the dividend, which the company will pay on the 31st of August.
The company's next dividend payment will be US$0.47 per share. Last year, in total, the company distributed US$1.88 to shareholders. Looking at the last 12 months of distributions, Booz Allen Hamilton Holding has a trailing yield of approximately 1.5% on its current stock price of $121.97. 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! As a result, readers should always check whether Booz Allen Hamilton Holding has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Booz Allen Hamilton Holding
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. It paid out 81% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether Booz Allen Hamilton Holding generated enough free cash flow to afford its dividend. It distributed 48% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 not enthused to see that Booz Allen Hamilton Holding's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. A payout ratio of 81% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Booz Allen Hamilton Holding has increased its dividend at approximately 18% a year on average.
To Sum It Up
Has Booz Allen Hamilton Holding got what it takes to maintain its dividend payments? Earnings per share have been flat and Booz Allen Hamilton Holding's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
In light of that, while Booz Allen Hamilton Holding has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for Booz Allen Hamilton Holding you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
