Phoenix Mobile plc (LON:FNX) shares will trade ex-dividend in 3 days. Generally, the ex-dividend date is one business day before the record date, which is the date on which the company determines the shareholders entitled to receive the dividend. The date the dividend is paid is important because the settlement process takes two full business days. So if you miss that date, the entry date will not appear in the company’s books. Accordingly, Fonix Mobile investors who purchased shares on November 24 or later, will not receive dividends, which will be paid on November 30.
The company’s next dividend payment will be £0.045 per share and over the past 12 months the company has paid a total of £0.055 per share. Last year’s total dividend payout gives Fonix Mobile a yield of 3.3% compared to the current share price of £1.95. We love to see companies pay dividends, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden goose! Therefore, we should always check whether the dividend payout looks sustainable and whether the company is growing.
Our analysis shows that FNX is potentially underrated!
Dividends are usually paid out of the company’s earnings. If a company pays more dividends than it has earned, the dividend may be unsustainable. Its dividend payout ratio is 81% of earnings, which means the company pays out a large portion of its earnings. Relatively limited reinvestment of profits may slow future earnings growth. We would be concerned about the risk of revenue decline. However, cash flow is usually more important than profit when assessing dividend sustainability, so we should always check that the company has made enough money to pay dividends. The company has paid out 104% of free cash flow over the past year, which we think is outside the ideal range for most companies. Cash flows tend to be much more volatile than earnings, so this could be a temporary effect, but we’d generally like to take a closer look here.
While Fonix Mobile’s dividend was covered by the company’s reported profits, money is a bit more important, so it’s not great to see that the company hasn’t generated enough cash to pay out a dividend. If this were to happen again, it would jeopardize Fonix Mobile’s ability to maintain its dividend.
Click here to see the company’s payout ratio and analyst forecasts for future dividends.
Have earnings and dividends grown?
Companies with declining earnings are dividend-challenged. Investors love dividends, so if earnings fall and dividends fall, expect the stock to sell off big at the same time. With that in mind, we’re not amused by Fonix Mobile’s 24% decline in earnings over the past five years. Such a sharp decline raises doubts about the sustainability of dividends in the future.
Another important way to gauge a company’s dividend prospects is to look at its historical dividend growth rate. Fonix Mobile has increased its dividend by an average of about 38% per year since our data began two years ago. The only way to pay higher dividends when earnings are falling is to pay out a larger share of profits, release cash from the balance sheet, or borrow money. Fonix Mobile already pays out a large portion of its earnings, so with no growth in earnings, we doubt that this dividend will grow much in the future.
Is Fonix Mobile an attractive dividend stock or better left on the shelf? It’s certainly not great to see earnings per share decline. The company has paid out an acceptable percentage of its revenue over the past year, but an uncomfortably high percentage of its cash flow. That’s not to say that we think Fonix Mobile is a bad company, but these qualities don’t usually lead to exceptional dividend results.
Although, if you are still interested in Fonix Mobile and want to know more, it will be very useful for you to know the risks involved in this stock. Our analysis shows 1 warning sign for Fonix Mobile and you should know this before buying any shares.
A common investment mistake is to buy the first interesting stock you see. You can find it here full list of high yielding dividend stocks.
Valuation is complicated, but we help simplify it.
Find out if Phoenix Mobile. may be overrated or underrated after reviewing our detailed analysis which includes fair value estimates, risks and caveats, dividends, inside information and financial condition.
Check out our free analysis
Have feedback on this article? Worried about content? Contact directly to us. Or send an email to mail to editorial team (at) simplewallst.com.
This Simply Wall St article is general in nature. We only provide commentary based on historical data and analyst forecasts using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. We aim to provide you with long-term targeted analysis based on underlying data. Please note that our analysis may not take into account recent price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.