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Should Income Investors Look At Altus Group Limited (TSE:AIF) Before Its Ex-Dividend?

Simply Wall St

Readers hoping to buy Altus Group Limited (TSE:AIF) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 27th of September in order to be eligible for this dividend, which will be paid on the 15th of October.

Altus Group's next dividend payment will be CA$0.1 per share. Last year, in total, the company distributed CA$0.6 to shareholders. Looking at the last 12 months of distributions, Altus Group has a trailing yield of approximately 1.6% on its current stock price of CA$38.1. 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! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Altus Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Altus Group's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Altus Group didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 42% of its free cash flow in the past year.

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

TSX:AIF Historical Dividend Yield, September 22nd 2019

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Altus Group was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Altus Group's dividend payments per share have declined at 6.7% per year on average over the past ten years, which is uninspiring.

Get our latest analysis on Altus Group's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Altus Group? 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's hard to get excited about Altus Group from a dividend perspective.

Wondering what the future holds for Altus Group? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for dividend stocks, we recommend checking our list of top 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.