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Fleetwood Corporation Limited (ASX:FWD) stock is about to trade ex-dividend in three days. Investors can purchase shares before the 1st of September in order to be eligible for this dividend, which will be paid on the 1st of October.
The upcoming dividend for Fleetwood will put a total of AU$0.12 per share in shareholders' pockets, up from last year's total dividends of AU$0.05. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Fleetwood can afford its dividend, and if the dividend could grow.
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. Fleetwood 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.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fleetwood reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Fleetwood's dividend payments per share have declined at 23% per year on average over the past 10 years, which is uninspiring.
We update our analysis on Fleetwood every 24 hours, so you can always get the latest insights on its financial health, here.
The Bottom Line
Is Fleetwood an attractive dividend stock, or better left on the shelf? In summary, Fleetwood appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while Fleetwood has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Fleetwood you should be aware of.
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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