Yahoo Finance Should Income Investors Look At Adams Natural Resources Fund, Inc. (NYSE:PEO) Before Its Ex-Dividend?
It looks like Adams Natural Resources Fund, Inc. (NYSE:PEO) is about to go ex-dividend in the next 4 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Adams Natural Resources Fund's shares on or after the 16th of May will not receive the dividend, which will be paid on the 31st of May.
The company's next dividend payment will be US$0.10 per share, on the back of last year when the company paid a total of US$1.35 to shareholders. Looking at the last 12 months of distributions, Adams Natural Resources Fund has a trailing yield of approximately 5.7% on its current stock price of US$23.53. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Adams Natural Resources Fund
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. An unusually high payout ratio of 355% of its profit suggests something is happening other than the usual distribution of profits to shareholders.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Click here to see how much of its profit Adams Natural Resources Fund paid out over the last 12 months.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Adams Natural Resources Fund has grown its earnings rapidly, up 47% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Adams Natural Resources Fund's dividend payments per share have declined at 3.3% per year on average over the past 10 years, which is uninspiring. Adams Natural Resources Fund is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Should investors buy Adams Natural Resources Fund for the upcoming dividend? We're not enthused to see Adams Natural Resources Fund's dividend was not well covered by earnings over the last year, although it is great to see earnings growing. We think there are likely better opportunities out there.
However if you're still interested in Adams Natural Resources Fund as a potential investment, you should definitely consider some of the risks involved with Adams Natural Resources Fund. Case in point: We've spotted 3 warning signs for Adams Natural Resources Fund 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.
