Yahoo Finance Ferrexpo plc (LON:FXPO) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Ferrexpo plc (LON:FXPO) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 14th of January to receive the dividend, which will be paid on the 28th of January.
Ferrexpo's next dividend payment will be US$0.13 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Based on the last year's worth of payments, Ferrexpo stock has a trailing yield of around 7.2% on the current share price of £3.4. If you buy this business for its dividend, you should have an idea of whether Ferrexpo's dividend is reliable and sustainable. So we need to investigate whether Ferrexpo can afford its dividend, and if the dividend could grow.
See our latest analysis for Ferrexpo
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. Ferrexpo is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 31% of its free cash flow in the past year.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. For this reason, we're glad to see Ferrexpo's earnings per share have risen 16% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Ferrexpo has lifted its dividend by approximately 17% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
From a dividend perspective, should investors buy or avoid Ferrexpo? It's great that Ferrexpo is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.
On that note, you'll want to research what risks Ferrexpo is facing. Be aware that Ferrexpo is showing 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored...
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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