Dividend Investors: Don't Be Too Quick To Buy Easton Investments Limited (ASX:EAS) For Its Upcoming 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 Easton Investments Limited (ASX:EAS) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 10th of September, you won't be eligible to receive this dividend, when it is paid on the 25th of September.
Easton Investments's next dividend payment will be AU$0.025 per share. Last year, in total, the company distributed AU$0.04 to shareholders. Based on the last year's worth of payments, Easton Investments stock has a trailing yield of around 5.3% on the current share price of A$0.75. If you buy this business for its dividend, you should have an idea of whether Easton Investments's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Easton Investments
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Easton Investments paid out 93% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Click here to see how much of its profit Easton Investments 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Easton Investments earnings per share are up 2.6% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, two years ago, Easton Investments has lifted its dividend by approximately 41% 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.
To Sum It Up
Is Easton Investments worth buying for its dividend? Easton Investments has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. 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 in mind though, if the poor dividend characteristics of Easton Investments don't faze you, it's worth being mindful of the risks involved with this business. For example - Easton Investments has 4 warning signs we think 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.
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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