Should Income Investors Look At Auswide Bank Ltd (ASX:ABA) Before Its Ex-Dividend?
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Auswide Bank Ltd (ASX:ABA) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 27th of February in order to receive the dividend, which the company will pay on the 16th of March.
Auswide Bank's upcoming dividend is AU$0.17 a share, following on from the last 12 months, when the company distributed a total of AU$0.35 per share to shareholders. Based on the last year's worth of payments, Auswide Bank has a trailing yield of 5.3% on the current stock price of A$6.71. If you buy this business for its dividend, you should have an idea of whether Auswide Bank's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Auswide Bank
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 83% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Auswide Bank's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Auswide Bank has seen its dividend decline 5.6% per annum on average over the past ten years, which is not great to see.
To Sum It Up
Should investors buy Auswide Bank for the upcoming dividend? Auswide Bank has been struggling to generate growth while also paying out more than half of its earnings to shareholders as dividends. We think there are likely better opportunities out there.
Wondering what the future holds for Auswide Bank? See what the two analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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.
