Looks like Altus Group Limited (TSE:AIF) is set to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because each time a stock is bought or sold, the transaction takes at least two business days to settle. This means that you will need to buy Altus Group shares by March 30 to receive the dividend, which will be paid on April 18.
The company’s next dividend payment will be CA$0.15 per share, following last year when the company paid a total of CA$0.60 to shareholders. Calculating the value of last year’s payouts shows that Altus Group has a rolling yield of 1.2% on the current share price of C$48.05. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! We therefore need to check whether dividend payments are covered and whether profits are increasing.
Check out our latest analysis for Altus Group
Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. The Altus Group has paid out 97% of its profits, which is more than we are happy with, barring extenuating circumstances. That said, even very profitable companies can sometimes not generate enough cash to pay the dividend, so we should always check if the dividend is covered by cash flow. Fortunately, its dividend payouts only accounted for 47% of the free cash flow it generated, which is a comfortable payout ratio.
It’s good to see that even though the Altus Group dividends weren’t well covered by earnings, they are at least affordable from a cash flow perspective. Still, if this were to happen again, we would wonder if the dividend is sustainable in a downturn.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Companies with strong growth prospects are generally the best dividend payers because it is easier to increase dividends when earnings per share improve. If earnings fall enough, the company could be forced to cut its dividend. That’s why he’s relieved to see that Altus Group’s earnings per share have increased by 8.5% per year over the past five years.
It should also be noted that the Altus Group has issued a significant number of new shares over the past year. Trying to increase the dividend while issuing large amounts of new stock reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a rock upwards.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. It looks like Altus Group dividends are largely the same as 10 years ago.
Is Altus Group worth buying for its dividend? Earnings per share increased slightly, and last year Altus Group paid out a small percentage of its cash flow. However, its dividend payments were not well covered by earnings. Overall, it’s hard to get excited about Altus Group from a dividend perspective.
While you’re not overly concerned about Altus Group’s ability to pay dividends, you should still keep in mind some of the other risks this business faces. Example: we have identified 3 warning signs for the Altus Group you should be aware.
A common investment mistake is to buy the first good stock you see. Here you can find a complete list of high yielding dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.