Yahoo Finance Only 3 Days Left To Cash In On Axfood AB (publ)'s (STO:AXFO) Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Axfood AB (publ) (STO:AXFO) is about to go ex-dividend in just 3 days. Investors can purchase shares before the 19th of March in order to be eligible for this dividend, which will be paid on the 25th of March.
Axfood's next dividend payment will be kr3.75 per share, and in the last 12 months, the company paid a total of kr7.25 per share. Based on the last year's worth of payments, Axfood has a trailing yield of 4.3% on the current stock price of SEK169.7. 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 Axfood has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Axfood
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Axfood paid out 92% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (71%) of its free cash flow in the past year, which is within an average range for most companies.
It's good to see that while Axfood's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Axfood earnings per share are up 8.6% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past ten years, Axfood has increased its dividend at approximately 11% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is Axfood worth buying for its dividend? Earnings per share have not grown all that much, and the company is paying out an uncomfortably high percentage of its income. Fortunately it paid out a lower percentage of its cash flow. It's not that we think Axfood is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Axfood. For example, we've found 1 warning sign for Axfood that we recommend you consider before investing in the business.
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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
