It looks like Alpha Financial Markets Consulting plc ( LON:AFM ) is about to go ex-dividend in the next 4 days. You can purchase shares before the 29th of August in order to receive the dividend, which the company will pay on the 11th of September.
Alpha Financial Markets Consulting's upcoming dividend is UK£0.041 a share, following on from the last 12 months, when the company distributed a total of UK£0.06 per share to shareholders. Based on the last year's worth of payments, Alpha Financial Markets Consulting stock has a trailing yield of around 3.0% on the current share price of £1.99. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Alpha Financial Markets Consulting can afford its dividend, and if the dividend could grow.
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. Alpha Financial Markets Consulting paid out 66% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Alpha Financial Markets Consulting generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 36% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Alpha Financial Markets Consulting could have strong prospects for future increases to the dividend.
We'd also point out that Alpha Financial Markets Consulting issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Alpha Financial Markets Consulting has delivered an average of 42% per year annual increase in its dividend, based on the past 2 years of dividend payments. 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 Alpha Financial Markets Consulting got what it takes to maintain its dividend payments? Alpha Financial Markets Consulting's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about Alpha Financial Markets Consulting, and we would prioritise taking a closer look at it.
Wondering what the future holds for Alpha Financial Markets Consulting? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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