It Might Not Be A Great Idea To Buy Aberdeen Group Plc (LON:ABDN) For Its Next Dividend
Readers hoping to buy Aberdeen Group Plc (LON:ABDN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Aberdeen Group's shares before the 13th of August in order to be eligible for the dividend, which will be paid on the 22nd of September.
The company's next dividend payment will be UK£0.073 per share. Last year, in total, the company distributed UK£0.15 to shareholders. Calculating the last year's worth of payments shows that Aberdeen Group has a trailing yield of 5.8% on the current share price of UK£2.526. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Aberdeen Group paid out 69% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
See our latest analysis for Aberdeen Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Aberdeen Group's earnings per share have dropped 11% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Aberdeen Group's dividend payments per share have declined at 3.6% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
To Sum It Up
Should investors buy Aberdeen Group for the upcoming dividend? We're not overly enthused to see Aberdeen Group's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
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 Aberdeen Group. We've identified 3 warning signs with Aberdeen Group (at least 1 which doesn't sit too well with us), and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.