It looks like Air Partner plc (LON:AIR) is about to go ex-dividend in the next 3 days. You can purchase shares before the 31st of October in order to receive the dividend, which the company will pay on the 29th of November.
Air Partner's next dividend payment will be UK£0.02 per share. Last year, in total, the company distributed UK£0.06 to shareholders. Looking at the last 12 months of distributions, Air Partner has a trailing yield of approximately 6.0% on its current stock price of £0.926. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Air Partner can afford its dividend, and if the dividend could grow.
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. Last year, Air Partner paid out 93% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. 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. It paid out more than half (50%) of its free cash flow in the past year, which is within an average range for most companies.
It's good to see that while Air Partner's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Air Partner's earnings per share have risen 12% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Air Partner's dividend payments per share have declined at 0.9% per year on average over the past ten years, which is uninspiring.
Is Air Partner an attractive dividend stock, or better left on the shelf? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
Ever wonder what the future holds for Air Partner? See what the four analysts we track 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.
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