Understanding ASX Ltd's Dividend Sustainability and Growth
ASX Ltd (ASXFY, Financial) recently announced a dividend of $0.66 per share, payable on 2024-04-10, with the ex-dividend date set for 2024-03-01. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into ASX Ltd's dividend performance and assess its sustainability.
What Does ASX Ltd Do?
The Australian Securities Exchange is a vertically integrated securities exchange business offering listing, data, trading, clearing, and settlement services across equities, debt, and derivatives. ASX Ltd benefits from various effective monopolies across its business and a disproportionately large listings business from Australia's outsize natural resources sector.
A Glimpse at ASX Ltd's Dividend History
ASX Ltd has maintained a consistent dividend payment record since 2011. Dividends are currently distributed on a bi-annual basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down ASX Ltd's Dividend Yield and Growth
As of today, ASX Ltd currently has a 12-month trailing dividend yield of 3.47% and a 12-month forward dividend yield of 3.20%. This suggests an expectation of decreased dividend payments over the next 12 months.
Over the past three years, ASX Ltd's annual dividend growth rate was 0.80%. Extended to a five-year horizon, this rate increased to 2.10% per year. And over the past decade, ASX Ltd's annual dividends per share growth rate stands at 3.70%.
Based on ASX Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of ASX Ltd stock as of today is approximately 3.85%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, ASX Ltd's dividend payout ratio is 1.44, which may suggest that the company's dividend may not be sustainable.
ASX Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks ASX Ltd's profitability 7 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. ASX Ltd's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and ASX Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. ASX Ltd's revenue has increased by approximately 2.30% per year on average, a rate that underperforms approximately 59.79% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, ASX Ltd's earnings increased by approximately -14.60% per year on average, a rate that underperforms approximately 76.72% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -4.60%, which underperforms approximately 85.14% of global competitors.
Next Steps
In conclusion, while ASX Ltd offers a notable dividend yield and a history of consistent dividend payments, the payout ratio and recent earnings growth rates raise questions about the sustainability of its dividend in the long term. Value investors should weigh the company's strong profitability against the potential for decreased dividends and slower growth rates. With the right balance, ASX Ltd could still represent a valuable addition to a dividend-focused portfolio. Will ASX Ltd's dividends continue to be a beacon for investors, or will they need to adjust their expectations? This is the question investors must ponder as they consider their next move.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
