U.S. markets open in 2 minutes
  • S&P Futures

    +44.75 (+1.22%)
  • Dow Futures

    +280.00 (+0.95%)
  • Nasdaq Futures

    +168.75 (+1.49%)
  • Russell 2000 Futures

    +23.00 (+1.38%)
  • Crude Oil

    +1.72 (+2.24%)
  • Gold

    +11.50 (+0.70%)
  • Silver

    +0.20 (+1.11%)

    +0.0009 (+0.10%)
  • 10-Yr Bond

    -0.0280 (-0.72%)
  • Vix

    +1.15 (+3.84%)

    +0.0067 (+0.62%)

    -0.0280 (-0.02%)

    +1,077.44 (+5.64%)
  • CMC Crypto 200

    +28.44 (+6.57%)
  • FTSE 100

    +6.22 (+0.09%)
  • Nikkei 225

    +140.32 (+0.53%)

Xerox Holdings (NASDAQ:XRX) Will Pay A Dividend Of $0.25

·3 min read

Xerox Holdings Corporation (NASDAQ:XRX) has announced that it will pay a dividend of $0.25 per share on the 31st of October. This makes the dividend yield 6.1%, which will augment investor returns quite nicely.

Check out our latest analysis for Xerox Holdings

Xerox Holdings' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Xerox Holdings isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 7.4%, so there isn't too much pressure on the dividend.


Xerox Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was $0.68, compared to the most recent full-year payment of $1.00. This means that it has been growing its distributions at 3.9% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Xerox Holdings' earnings per share has shrunk at 35% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Xerox Holdings' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Xerox Holdings you should be aware of, and 1 of them shouldn't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here