Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Accord Financial Corp. (TSE:ACD) is about to trade ex-dividend in the next three days. If you purchase the stock on or after the 13th of August, you won’t be eligible to receive this dividend, when it is paid on the 1st of September.
Accord Financial’s next dividend payment will be CA$0.05 per share, on the back of last year when the company paid a total of CA$0.20 to shareholders. Looking at the last 12 months of distributions, Accord Financial has a trailing yield of approximately 3.2% on its current stock price of CA$6.19. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Accord Financial can afford its dividend, and if the dividend could grow.
See our latest analysis for Accord Financial
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. An unusually high payout ratio of 261% of its profit suggests something is happening other than the usual distribution of profits to shareholders.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
Click here to see how much of its profit Accord Financial paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Accord Financial’s earnings per share have plummeted approximately 32% a year over the previous five years.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Accord Financial’s dividend payments per share have declined at 2.6% per year on average over the past 10 years, which is uninspiring. While it’s not great that earnings and dividends per share have fallen in recent years, we’re encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
From a dividend perspective, should investors buy or avoid Accord Financial? Not only are earnings per share shrinking, but Accord Financial is paying out a disconcertingly high percentage of its profit as dividends. It’s not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. All things considered, we’re not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
With that being said, if you’re still considering Accord Financial as an investment, you’ll find it beneficial to know what risks this stock is facing. Be aware that Accord Financial is showing 6 warning signs in our investment analysis, and 2 of those make us uncomfortable…
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.
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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