Today is Thursday, July 11, 2019, and this is your daily dividend safety update. Today we’re looking at Argan (NYSE: AGX) stock to see whether its 2.46% dividend is safe.
Editor’s Note: We’ve been keeping an eye on some dividend stocks that could be better for your income portfolio than Argan. These dividends are much bigger — and safer — than the paltry yields many investors settle for. Enter your email below to learn more.
Let’s look at the company’s payout ratio, cash flow growth, and dividend history to gauge the probability of a dividend cut in the next few years.
Payout Ratio (Dividends/Earnings)
Argan has a payout ratio of 89.82%. That’s too high for our liking. Payout ratio equals dividends per share divided by earnings per share. Payout ratios near or over 100% indicate that the company might not be able to afford its dividend — or that it might have to borrow money to pay it.
Cash Flow Growth Year-Over-Year
Argan has grown its cash flow by 40.63% in the last year. That’s a good omen for dividend investors! When a company grows its cash flow, it can use some of that extra cash to strengthen — or even raise — its dividend.
Dividend History & Recent Cuts
Argan has a recent history of dividend cuts. In fact, it’s only been 1 year since the last cut. That’s not a good sign. Companies that have recently cut their dividend are generally more likely to cut them again.
Argan stock has failed 2 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is likely in the next few years.
Are you worried about the safety of your dividend stocks? Is there a particular stock you want us to grade next? Leave the ticker symbol in the comment section below.