Yahoo Finance Argan (NYSE:AGX) Is Paying Out A Dividend Of $0.25
Argan, Inc. (NYSE:AGX) will pay a dividend of $0.25 on the 31st of January. The dividend yield will be 2.8% based on this payment which is still above the industry average.
See our latest analysis for Argan
Argan's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Argan's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
Looking forward, earnings per share is forecast to rise by 44.0% over the next year. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.
Argan Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was $0.60, compared to the most recent full-year payment of $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Argan's EPS has fallen by approximately 22% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Our Thoughts On Argan's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Argan is earning enough to cover the payments, the cash flows are lacking. We don't think Argan is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Argan that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
