It Might Not Be A Great Idea To Buy ACCO Brands Corporation (NYSE:ACCO) For Its Next Dividend
It looks like ACCO Brands Corporation (NYSE:ACCO) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase ACCO Brands' shares on or after the 9th of March will not receive the dividend, which will be paid on the 5th of April.
The company's next dividend payment will be US$0.075 per share. Last year, in total, the company distributed US$0.30 to shareholders. Based on the last year's worth of payments, ACCO Brands stock has a trailing yield of around 5.3% on the current share price of $5.71. If you buy this business for its dividend, you should have an idea of whether ACCO Brands's dividend is reliable and sustainable. As a result, readers should always check whether ACCO Brands has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for ACCO Brands
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ACCO Brands reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If ACCO Brands 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 47% 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.
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. ACCO Brands was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, five years ago, ACCO Brands has lifted its dividend by approximately 4.6% a year on average.
We update our analysis on ACCO Brands every 24 hours, so you can always get the latest insights on its financial health, here.
To Sum It Up
Is ACCO Brands an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of ACCO Brands.
With that being said, if you're still considering ACCO Brands as an investment, you'll find it beneficial to know what risks this stock is facing. We've identified 2 warning signs with ACCO Brands (at least 1 which shouldn't be ignored), and understanding these should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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