Readers hoping to buy Alexander Forbes Group Holdings Limited (JSE:AFH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company’s books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Alexander Forbes Group Holdings’ shares before the 8th of January to receive the dividend, which will be paid on the 13th of January.
The company’s next dividend payment will be R00.22 per share, and in the last 12 months, the company paid a total of R0.50 per share. Calculating the last year’s worth of payments shows that Alexander Forbes Group Holdings has a trailing yield of 6.2% on the current share price of R08.10. 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.
View our latest analysis for Alexander Forbes Group Holdings
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Alexander Forbes Group Holdings distributed an unsustainably high 110% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Click here to see how much of its profit Alexander Forbes Group Holdings paid out over the last 12 months.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Alexander Forbes Group Holdings’s earnings per share have been growing at 17% a year for the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Alexander Forbes Group Holdings has increased its dividend at approximately 15% a year on average. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
