Interested In ARC Document Solutions, Inc.'s (NYSE:ARC) Upcoming US$0.01 Dividend? You Have 2 Days Left
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that ARC Document Solutions, Inc. (NYSE:ARC) is about to go ex-dividend in just 2 days. If you purchase the stock on or after the 29th of April, you won't be eligible to receive this dividend, when it is paid on the 29th of May.
ARC Document Solutions's next dividend payment will be US$0.01 per share. Last year, in total, the company distributed US$0.04 to shareholders. Last year's total dividend payments show that ARC Document Solutions has a trailing yield of 6.0% on the current share price of $0.6701. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for ARC Document Solutions
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. ARC Document Solutions has a low and conservative payout ratio of just 15% of its income after tax.
Click here to see how much of its profit ARC Document Solutions paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by ARC Document Solutions's 16% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
This is ARC Document Solutions's first year of paying a dividend, so it doesn't have much of a history yet to compare to.
The Bottom Line
Should investors buy ARC Document Solutions for the upcoming dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. Overall, ARC Document Solutions looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in ARC Document Solutions for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 5 warning signs for ARC Document Solutions that we strongly recommend you have a look at before investing in the company.
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.
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.
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. Thank you for reading.
