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Xerox Holdings Corporation (NYSE: XRX) investors are expected to receive a payment of $ 0.25 per share on November 1. This makes the dividend yield of 4.3%, which will increase investor returns quite well.
Check out our latest review for Xerox Holdings
Xerox Holdings dividend well covered by earnings
Impressive dividend yields are good, but it doesn’t matter much if the payouts can’t be sustained. The last dividend was fairly easily covered by the profits of Xerox Holdings. This indicates that a large portion of the profits are reinvested in the business, with the aim of fueling growth.
Over the next year, EPS is expected to drop 14.7%. If the dividend continues on the same path as it has recently been, we estimate that the payout ratio could be 63%, which is comfortable for the company to continue in the future.
Xerox Holdings has a strong track record
The company has a strong history of paying dividends with very little fluctuation. Since 2011, the first annual payment was US $ 0.68, compared to the most recent annual payment of US $ 1.00. This implies that the company has increased its distributions at an annual rate of approximately 3.9% over this period. While the consistency of dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
Dividend growth is questionable
Some investors will be eager to buy a portion of the company’s stock based on its dividend history. However, initial appearances can be deceptive. It’s not great to see that Xerox Holdings earnings per share have fallen about 9.9% per year over the past five years. If the company earns less over time, it naturally follows that it will also have to pay less dividends.
Our thoughts on the Xerox Holdings dividend
In summary, we are happy that the dividend remains constant and we think there is a good chance that this will continue in the future. While the payouts appear sustainable for now, profits have declined, so the dividend could come under pressure in the future. Given all of this, the dividend looks viable going forward, but investors should be aware that the company has pushed the boundaries of sustainability in the past and may do so again.
Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. However, there are other things for investors to consider when analyzing the performance of stocks. As an example, we have identified 1 warning sign for Xerox Holdings that you need to know before you invest. If you are a dividend investor, you can also view our curated list of high performing dividend stocks.
This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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