There's A Lot To Like About Argent Industrial's (JSE:ART) Upcoming R00.74 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Argent Industrial Limited (JSE:ART) is about to trade ex-dividend in the next 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase Argent Industrial's shares before the 9th of September to receive the dividend, which will be paid on the 14th of September.
The company's next dividend payment will be R00.74 per share, and in the last 12 months, the company paid a total of R1.48 per share. Based on the last year's worth of payments, Argent Industrial has a trailing yield of 3.6% on the current stock price of R040.84. 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! We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Argent Industrial's payout ratio is modest, at just 26% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 23% of its free cash flow as dividends last year, which is conservatively low.
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.
View our latest analysis for Argent Industrial
Click here to see how much of its profit Argent Industrial paid out over the last 12 months.
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. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Argent Industrial has grown its earnings rapidly, up 20% a year for the past five years. Argent Industrial is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Argent Industrial has delivered an average of 23% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Argent Industrial worth buying for its dividend? Argent Industrial has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
In light of that, while Argent Industrial has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with Argent Industrial and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.