Readers hoping to buy Accord Financial Corp. (TSE:ACD) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Accord Financial’s shares before the 12th of May to receive the dividend, which will be paid on the 1st of June.
The company’s next dividend payment will be CA$0.075 per share, and in the last 12 months, the company paid a total of CA$0.30 per share. Calculating the last year’s worth of payments shows that Accord Financial has a trailing yield of 3.5% on the current share price of CA$8.57. 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! As a result, readers should always check whether Accord Financial has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Accord Financial has a low and conservative payout ratio of just 14% of its income after tax. Accord Financial paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Accord Financial’s earnings per share have been growing at 12% a year for the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Accord Financial’s dividend payments are effectively flat on where they were 10 years ago.
From a dividend perspective, should investors buy or avoid Accord Financial? Companies like Accord Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Accord Financial appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
While it’s tempting to invest in Accord Financial for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 5 warning signs we’ve spotted with Accord Financial (including 3 which are a bit unpleasant).
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.