Readers wishing to buy Arbuthnot PLC banking group (LON: ARBB) for its dividend will have to act shortly, as the stock is about to trade ex-dividend. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. In other words, investors can buy Arbuthnot Banking Group shares before August 26 in order to be eligible for the dividend, which will be paid on September 24.

The company’s next dividend payment will be £ 0.16 per share. Last year, in total, the company distributed £ 0.32 to shareholders. Based on the value of last year’s payments, Arbuthnot Banking Group has a rolling 3.1% return on the current share price of £ 10.3. If you are buying this company for its dividend, you should know if Arbuthnot Banking Group’s dividend is reliable and sustainable. You have to see if the dividend is covered by profits and if it increases.

See our latest analysis for Arbuthnot Banking Group

Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. Arbuthnot Banking Group paid out 91% of its profits, which is more than we are comfortable with, barring extenuating circumstances.

When a company pays a dividend that is not well covered by earnings, the dividend is generally considered to be more likely to be cut.

Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.

OBJECTIVE: Historic ARBB dividend 22 August 2021

Have profits and dividends increased?

Companies with consistently rising earnings per share usually make the best dividend-paying stocks because they generally find it easier to raise dividends per share. If business goes into recession and the dividend is reduced, the company could experience a sharp drop in value. That’s why it’s heartwarming to see Arbuthnot Banking Group profits soar, up 76% annually over the past five years.

Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Arbuthnot Banking Group has generated an average annual increase of 3.4% per annum in its dividend, based on dividend payments over the past 10 years. Earnings per share have grown much faster than dividends, potentially because Arbuthnot Banking Group is withholding more of its earnings to grow the business.

To summarize

Should investors buy Arbuthnot Banking Group for the next dividend? We are not thrilled to see that Arbuthnot Banking Group’s dividend was not well covered by last year’s earnings, although it is great to see earnings rise. It might be worth researching if the company is reinvesting in growth projects that could increase profits and dividends in the future, but for now we are on the close on its dividend outlook.

However, if you are still interested in Arbuthnot Banking Group as a potential investment, you should definitely consider some of the risks associated with Arbuthnot Banking Group. In terms of investment risks, we have identified 3 warning signs with Arbuthnot Banking Group and understanding them should be part of your investment process.

If you are in the dividend-paying stock market, we recommend that you check out our list of the highest dividend-paying stocks with a yield above 2% and a future dividend.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in the mentioned stocks.
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