Admiral Group plc (LON:ADM) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Admiral Group's shares before the 1st of September in order to receive the dividend, which the company will pay on the 30th of September.
The company's next dividend payment will be UK£1.05 per share. Last year, in total, the company distributed UK£1.32 to shareholders. Looking at the last 12 months of distributions, Admiral Group has a trailing yield of approximately 6.0% on its current stock price of £21.92. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Admiral Group paid out 66% of its earnings to investors last year, a normal payout level for most businesses.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Admiral Group's earnings per share have been growing at 11% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Admiral Group has delivered 5.7% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Admiral Group is keeping back more of its profits to grow the business.
The Bottom Line
Should investors buy Admiral Group for the upcoming dividend? Earnings per share are growing nicely, and Admiral Group is paying out a percentage of its earnings that is around the average for dividend-paying stocks. We think this is a pretty attractive combination, and would be interested in investigating Admiral Group more closely.
On that note, you'll want to research what risks Admiral Group is facing. For example - Admiral Group has 2 warning signs 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.
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