The board of Australian Foundation Investment Company Limited (ASX:AFI) has announced that it will pay a dividend of A$0.115 per share on the 26th of February. The payment will take the dividend yield to 3.3%, which is in line with the average for the industry.
Check out our latest analysis for Australian Foundation Investment
Australian Foundation Investment Doesn’t Earn Enough To Cover Its Payments
We aren’t too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, the company was paying out 107% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
If the company can’t turn things around, EPS could fall by 5.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 115%, which could put…