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Highlights
- Flight Centre (FLT) nears ex-dividend deadline
- Dividend yield stands at 4.2% based on current prices
- Profit and cash flow cover the payout, but earnings trend poses concerns
Flight Centre (ASX:FLT) is set to trade ex-dividend in just four days, marking an important deadline for shareholders looking to qualify for the company’s upcoming dividend payment. The ex-dividend date, scheduled for March 26th, is the last opportunity for shareholders to be eligible for the dividend, which is slated to be distributed on April 17th.
The company has declared a dividend of AU$0.11 per share for this round. Looking back at the past year, the total dividend paid out was AU$0.60 per share. Based on the current share price of AU$14.30, this brings the trailing dividend yield to an appealing 4.2%. While the yield may catch attention, the sustainability and growth potential of the dividend are equally crucial.
Last year, Flight Centre distributed 80% of its earnings as dividends. This payout ratio suggests a moderately high return to shareholders, but it also leaves less room for reinvestment into the business. More positively, the company paid out only 65% of its free cash flow, which indicates that the dividend is adequately supported by the cash the business generates.
The alignment between profit and cash flow coverage is a good sign, implying that the current dividend is on stable ground—as long as earnings do not continue their downward path.
However, one concerning trend is the significant decline in earnings per share. Over the past five years, Flight Centre’s earnings have fallen at an average annual rate of 28%. This drop in profitability reduces the company's ability to grow, or even maintain, dividend payments in the long term.
In addition, dividend payments themselves have been on a downward trend. Over the last decade, Flight Centre’s dividend per share has decreased by an average of 8.9% annually. While cutting dividends can sometimes be a responsible move to preserve financial stability, consistent declines in both earnings and dividends are typically viewed cautiously by income-focused investors.
Flight Centre (FLT) currently offers a reasonable yield supported by cash flow, its declining earnings trend raises flags about the future stability of its dividends. The upcoming ex-dividend date may attract short-term interest, but the long-term dividend outlook remains uncertain without a turnaround in earnings growth.
