Only Four Days Left To Cash In On AdvanSix's (NYSE:ASIX) Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see AdvanSix Inc. (NYSE:ASIX) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase AdvanSix's shares on or after the 13th of November, you won't be eligible to receive the dividend, when it is paid on the 28th of November.
The company's next dividend payment will be US$0.16 per share. Last year, in total, the company distributed US$0.64 to shareholders. Looking at the last 12 months of distributions, AdvanSix has a trailing yield of approximately 2.6% on its current stock price of $24.6. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for AdvanSix
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. AdvanSix has a low and conservative payout ratio of just 18% of its income after tax. A useful secondary check can be to evaluate whether AdvanSix generated enough free cash flow to afford its dividend. It paid out more than half (55%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that AdvanSix's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. AdvanSix's earnings per share have fallen at approximately 6.4% 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. Since the start of our data, two years ago, AdvanSix has lifted its dividend by approximately 13% a year on average.
To Sum It Up
Has AdvanSix got what it takes to maintain its dividend payments? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. In summary, while it has some positive characteristics, we're not inclined to race out and buy AdvanSix today.
If you want to look further into AdvanSix, it's worth knowing the risks this business faces. For example - AdvanSix has 1 warning sign we think you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
