There's A Lot To Like About AMCON Distributing's (NYSEMKT:DIT) Upcoming US$0.18 Dividend - Simply Wall St
AMCON Distributing Company (NYSEMKT:DIT) stock is about to trade ex-dividend in 4 days. Ex-dividend means that investors that purchase the stock on or after the 4th of February will not receive this dividend, which will be paid on the 2nd of March.
AMCON Distributing's upcoming dividend is US$0.18 a share, following on from the last 12 months, when the company distributed a total of US$5.72 per share to shareholders. Looking at the last 12 months of distributions, AMCON Distributing has a trailing yield of approximately 5.1% on its current stock price of $112. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for AMCON Distributing
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. AMCON Distributing paid out just 4.9% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 3.9% of its free cash flow last 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 how much of its profit AMCON Distributing paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at AMCON Distributing, with earnings per share up 8.0% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, AMCON Distributing has lifted its dividend by approximately 23% 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.
The Bottom Line
Has AMCON Distributing got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and AMCON Distributing is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but AMCON Distributing is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 4 warning signs for AMCON Distributing (1 doesn't sit too well with us) you should be aware of.
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.
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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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2021-01-30 13:35:05Z
https://simplywall.st/stocks/us/retail/nysemkt-dit/amcon-distributing/news/theres-a-lot-to-like-about-amcon-distributings-nysemktdit-up
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