Booz Allen Hamilton Holding Corporation ((NYSE:(BA))H) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 11th of February will not receive the dividend, which will be paid on the 2nd of March.
Booz Allen Hamilton Holding’s upcoming dividend is US$0.37 a share, following on from the last 12 months, when the company distributed a total of US$1.24 per share to shareholders. Looking at the last 12 months of distributions, Booz Allen Hamilton Holding has a trailing yield of approximately 1.5% on its current stock price of $82.09. If you buy this business for its dividend, you should have an idea of whether Booz Allen Hamilton Holding’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.
Check out our latest analysis for Booz Allen Hamilton Holding
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. Fortunately Booz Allen Hamilton Holding’s payout ratio is modest, at just 31% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 19% of its free cash flow as dividends last year, which is conservatively low.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That’s why it’s comforting to see Booz Allen Hamilton Holding’s earnings have been skyrocketing, up 20% per annum for the past five years. Booz Allen Hamilton Holding is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, Booz Allen Hamilton Holding has lifted its dividend by approximately 15% a year on average. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Is Booz Allen Hamilton Holding worth buying for its dividend? It’s great that Booz Allen Hamilton Holding is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It’s disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It’s a promising combination that should mark this company worthy of closer attention.
In light of that, while Booz Allen Hamilton Holding has an appealing dividend, it’s worth knowing the risks involved with this stock. For example – Booz Allen Hamilton Holding has 2 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.
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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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