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Fuller, Smith & Turner P.L.C. (LON:FSTA) Is About To Go Ex-Dividend, And It Pays A 0.4% Yield

Fuller, Smith & Turner P.L.C. (LON:FSTA) stock is about to trade ex-dividend in 3 days time. Ex-dividend means that investors that purchase the stock on or after the 1st of August will not receive this dividend, which will be paid on the 6th of September.

Fuller Smith & Turner's upcoming dividend is UK£0.043 a share, following on from the last 12 months, when the company distributed a total of UK£0.20 per share to shareholders. Based on the last year's worth of payments, Fuller Smith & Turner stock has a trailing yield of around 1.8% on the current share price of £10.575. 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! So we need to investigate whether Fuller Smith & Turner can afford its dividend, and if the dividend could grow.

View our latest analysis for Fuller Smith & Turner

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Fuller Smith & Turner paying out a modest 33% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out dividends equivalent to 244% of what it generated in free cash flow, a disturbingly high percentage. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.

While Fuller Smith & Turner's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Fuller Smith & Turner's ability to maintain its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

LSE:FSTA Historical Dividend Yield, July 28th 2019
LSE:FSTA Historical Dividend Yield, July 28th 2019

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Fuller Smith & Turner earnings per share are up 2.6% per annum over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Fuller Smith & Turner has delivered 7.2% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Fuller Smith & Turner for the upcoming dividend? Fuller Smith & Turner has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. In summary, it's hard to get excited about Fuller Smith & Turner from a dividend perspective.

Curious what other investors think of Fuller Smith & Turner? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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 editorial-team@simplywallst.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.

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