It looks like Booz Allen Hamilton Holding Corporation (NYSE:BAH) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 13th of February, you won't be eligible to receive this dividend, when it is paid on the 28th of February.
Booz Allen Hamilton Holding's next dividend payment will be US$0.31 per share, and in the last 12 months, the company paid a total of US$1.24 per share. Based on the last year's worth of payments, Booz Allen Hamilton Holding has a trailing yield of 1.6% on the current stock price of $77.43. 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 Booz Allen Hamilton Holding has been able to grow its dividends, or if the dividend might be cut.
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. Booz Allen Hamilton Holding paid out a comfortable 31% of its profit last year. 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. Thankfully its dividend payments took up just 30% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Booz Allen Hamilton Holding's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Booz Allen Hamilton Holding's earnings per share have been growing at 14% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Booz Allen Hamilton Holding has delivered an average of 17% per year annual increase in its dividend, based on the past eight years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Is Booz Allen Hamilton Holding an attractive dividend stock, or better left on the shelf? It's great that Booz Allen Hamilton Holding is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Booz Allen Hamilton Holding looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Wondering what the future holds for Booz Allen Hamilton Holding? See what the 13 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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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