05-04-2025
ADvTECH Limited (JSE:ADH) Pays A R00.63 Dividend In Just Three Days
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ADvTECH Limited (JSE:ADH) is about to trade ex-dividend in the next 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase ADvTECH's shares before the 9th of April in order to be eligible for the dividend, which will be paid on the 14th of April.
The company's next dividend payment will be R00.63 per share, and in the last 12 months, the company paid a total of R1.01 per share. Based on the last year's worth of payments, ADvTECH stock has a trailing yield of around 3.3% on the current share price of R030.62. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. ADvTECH paid out more than half (50%) of its earnings last year, which is a regular payout ratio for most companies. 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. It paid out 92% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.
While ADvTECH's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were ADvTECH to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
See our latest analysis for ADvTECH
Click here to see how much of its profit ADvTECH paid out over the last 12 months.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see ADvTECH's earnings per share have risen 18% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, ADvTECH has increased its dividend at approximately 15% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
From a dividend perspective, should investors buy or avoid ADvTECH? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note ADvTECH paid out a much higher percentage of its free cash flow, which makes us uncomfortable. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
Keen to explore more data on ADvTECH's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
