It looks like Autosports Group Limited (ASX:ASG) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Autosports Group’s shares on or after the 14th of May, you won’t be eligible to receive the dividend, when it is paid on the 29th of May.
The company’s upcoming dividend is AU$0.05 a share, following on from the last 12 months, when the company distributed a total of AU$0.08 per share to shareholders. Last year’s total dividend payments show that Autosports Group has a trailing yield of 3.4% on the current share price of AU$2.32. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Autosports Group has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. That’s why it’s good to see Autosports Group paying out a modest 44% of its earnings. A useful secondary check can be to evaluate whether Autosports Group generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (85%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
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.
Check out our latest analysis for Autosports Group
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
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. For this reason, we’re glad to see Autosports Group’s earnings per share have risen 10% per annum over the last five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. Higher earnings generally bode well for growing dividends, although with seemingly strong growth prospects we’d wonder why management are not reinvesting more in the business.
