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A.G. BARR p.l.c. (LON:BAG) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase A.G. BARR's shares on or after the 8th of May, you won't be eligible to receive the dividend, when it is paid on the 6th of June.
The company's next dividend payment will be UK£0.1376 per share. Last year, in total, the company distributed UK£0.17 to shareholders. Based on the last year's worth of payments, A.G. BARR has a trailing yield of 2.5% on the current stock price of UK£6.87. If you buy this business for its dividend, you should have an idea of whether A.G. BARR's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see A.G. BARR paying out a modest 47% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 59% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that A.G. BARR'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.
View our latest analysis for A.G. BARR
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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at A.G. BARR, with earnings per share up 6.1% on average over the last five years. Decent historical earnings per share growth suggests A.G. BARR has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.