Dividend Investors: Don't Be Too Quick To Buy ACCO Brands Corporation (NYSE:ACCO) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ACCO Brands Corporation (NYSE:ACCO) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase ACCO Brands' shares before the 18th of May in order to receive the dividend, which the company will pay on the 9th of June.
The company's next dividend payment will be US$0.075 per share, on the back of last year when the company paid a total of US$0.30 to shareholders. Based on the last year's worth of payments, ACCO Brands stock has a trailing yield of around 5.8% on the current share price of $5.21. If you buy this business for its dividend, you should have an idea of whether ACCO Brands's dividend is reliable and sustainable. So we need to investigate whether ACCO Brands can afford its dividend, and if the dividend could grow.
See our latest analysis for ACCO Brands
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ACCO Brands lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Luckily it paid out just 15% of its free cash flow last year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. ACCO Brands was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, five years ago, ACCO Brands has lifted its dividend by approximately 4.6% a year on average.
Get our latest analysis on ACCO Brands's balance sheet health here.
Final Takeaway
Has ACCO Brands got what it takes to maintain its dividend payments? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
So if you're still interested in ACCO Brands despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For instance, we've identified 2 warning signs for ACCO Brands (1 is potentially serious) you should be aware of.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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