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It Might Not Be A Great Idea To Buy Advanced Share Registry Limited (ASX:ASW) For Its Next Dividend

Simply Wall St

Advanced Share Registry Limited (ASX:ASW) stock is about to trade ex-dividend in 4 days time. You will need to purchase shares before the 11th of September to receive the dividend, which will be paid on the 16th of September.

Advanced Share Registry's upcoming dividend is AU$0.02 a share, following on from the last 12 months, when the company distributed a total of AU$0.04 per share to shareholders. Calculating the last year's worth of payments shows that Advanced Share Registry has a trailing yield of 5.8% on the current share price of A$0.69. If you buy this business for its dividend, you should have an idea of whether Advanced Share Registry's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Advanced Share Registry

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Advanced Share Registry distributed an unsustainably high 116% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

Click here to see how much of its profit Advanced Share Registry paid out over the last 12 months.

ASX:ASW Historical Dividend Yield, September 6th 2019

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Advanced Share Registry's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Advanced Share Registry has lifted its dividend by approximately 7.2% a year on average.

Final Takeaway

From a dividend perspective, should investors buy or avoid Advanced Share Registry? Advanced Share Registry has an uncomfortably high payout ratio, and its earnings have not grown at all. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Want to learn more about Advanced Share Registry's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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.

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.