Yahoo Finance The Andersons, Inc. (NASDAQ:ANDE) Looks Interesting, And It's About To Pay A 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 The Andersons, Inc. (NASDAQ:ANDE) is about to go ex-dividend in just three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Thus, you can purchase Andersons' shares before the 1st of July in order to receive the dividend, which the company will pay on the 22nd of July.
The company's upcoming dividend is US$0.19 a share, following on from the last 12 months, when the company distributed a total of US$0.76 per share to shareholders. Last year's total dividend payments show that Andersons has a trailing yield of 1.5% on the current share price of US$49.73. 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 investigate whether Andersons can afford its dividend, and if the dividend could grow.
View our latest analysis for Andersons
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Andersons has a low and conservative payout ratio of just 21% of its income after tax. A useful secondary check can be to evaluate whether Andersons generated enough free cash flow to afford its dividend. It paid out 2.9% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that Andersons's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Andersons 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Andersons's earnings per share have been growing at 20% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Andersons has delivered an average of 5.9% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Andersons is keeping back more of its profits to grow the business.
Final Takeaway
Is Andersons an attractive dividend stock, or better left on the shelf? Andersons has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Andersons, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks Andersons is facing. Case in point: We've spotted 1 warning sign for Andersons you should be aware of.
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.
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