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Be Sure To Check Out Booz Allen Hamilton Holding Corporation (NYSE:BAH) Before It Goes Ex-Dividend

Readers hoping to buy Booz Allen Hamilton Holding Corporation (NYSE:BAH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. Accordingly, Booz Allen Hamilton Holding investors that purchase the stock on or after the 9th of February will not receive the dividend, which will be paid on the 1st of March.

The company's next dividend payment will be US$0.47 per share. Last year, in total, the company distributed US$1.88 to shareholders. Calculating the last year's worth of payments shows that Booz Allen Hamilton Holding has a trailing yield of 1.9% on the current share price of $96.84. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Booz Allen Hamilton Holding

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Booz Allen Hamilton Holding paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 43% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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. For this reason, we're glad to see Booz Allen Hamilton Holding's earnings per share have risen 13% per annum over the last five years. Booz Allen Hamilton Holding has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Booz Allen Hamilton Holding has increased its dividend at approximately 18% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Has Booz Allen Hamilton Holding got what it takes to maintain its dividend payments? We like Booz Allen Hamilton Holding's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Booz Allen Hamilton Holding for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for Booz Allen Hamilton Holding you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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