AstroNova, Inc. (NASDAQ:ALOT) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 13th of September in order to be eligible for this dividend, which will be paid on the 24th of September.
AstroNova's next dividend payment will be US$0.07 per share, and in the last 12 months, the company paid a total of US$0.28 per share. Based on the last year's worth of payments, AstroNova has a trailing yield of 1.8% on the current stock price of $15.51. If you buy this business for its dividend, you should have an idea of whether AstroNova's dividend is reliable and sustainable. As a result, readers should always check whether AstroNova has been able to grow its dividends, or if the dividend might be cut.
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. Fortunately AstroNova's payout ratio is modest, at just 31% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (59%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that AstroNova'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.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see AstroNova's earnings have been skyrocketing, up 41% per annum for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. AstroNova has delivered 1.6% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because AstroNova is keeping back more of its profits to grow the business.
To Sum It Up
From a dividend perspective, should investors buy or avoid AstroNova? Earnings per share have grown at a nice rate in recent times and over the last year, AstroNova paid out less than half its earnings and a bit over half its free cash flow. AstroNova looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
Want to learn more about AstroNova's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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