AMCON Distributing Company (NYSEMKT:DIT) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 30th of July in order to receive the dividend, which the company will pay on the 24th of August.
AMCON Distributing's next dividend payment will be US$0.18 per share. Last year, in total, the company distributed US$1.00 to shareholders. Based on the last year's worth of payments, AMCON Distributing stock has a trailing yield of around 1.5% on the current share price of $68.18. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether AMCON Distributing has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. AMCON Distributing has a low and conservative payout ratio of just 16% of its income after tax. A useful secondary check can be to evaluate whether AMCON Distributing generated enough free cash flow to afford its dividend. AMCON Distributing paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. AMCON Distributing's earnings per share have fallen at approximately 11% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, AMCON Distributing has increased its dividend at approximately 3.3% a year on average.
To Sum It Up
From a dividend perspective, should investors buy or avoid AMCON Distributing? It's disappointing to see earnings per share declining, and this would ordinarily be enough to discourage us from most dividend stocks, even though AMCON Distributing is paying out less than half its income as dividends. However, it's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. Bottom line: AMCON Distributing has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
Although, if you're still interested in AMCON Distributing and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 5 warning signs for AMCON Distributing that we strongly recommend you have a look at before investing in the company.
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.
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. 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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