Published On: March 8th, 2024
With just four days left until Grange Resources (ASX: GRR) goes ex-dividend, investors are asking about last-minute buys. The only thing left to do is a risk analysis.
If the risk ratio is on a level field, these four days can be ideal for buyers to invest. This is because the ex-dividend date, typically a day before the record date (the last date before one should be present in the company shareholder list to receive dividends), will be the last date that would entitle buyers to a pay-out this coming March 28th. In this case, March 12 is the date by which the company would go ex-dividend.
Grange Resources, one of Australia’s leading producers of iron ore pellets, has reasonably shown a stable dividend-payout-to-earnings ratio, which is a warm attitude toward intelligent business. The firm had been in recent news after the announcement that they had found underground mines below the Savage River in Tasmania, Australia. It projected robust financial outcomes for the company according to its feasibility studies. The finding also garnered support from various fronts because applying electric mining equipment and handling materials means up to 80% reduced carbon emissions.
However, apart from a surge in business projections, stable business health year-round is crucial when deciding investment options, which we intend to discuss in this article.
2023 – 24: A year of good health?
In an ideal situation, a company should always pay out dividends less than its earnings, thus keeping aside resources for unforeseen circumstances, which is always a risk in business. In this regard, Grange Resources has always been conservative, a possible reason for its 55-year existence.
Last year alone, Grange paid out only 15% of its profit as dividends, which is deemed considerably low but is a stable move. Companies that give out dividends more than their earnings are hardly a wise sight, even for investors, as the dividends can turn out unstable soon.
Now, the question is about the earnings and cash flow.
Earnings – on the rise?
Taking account of Grange’s earnings chart for the past five years is indeed a refreshing sight. The company shows a solid 5.8% annual growth in earnings per share. Companies with stable earnings growth often make a good investment option as they have enough margin to pay out and even hike dividends. If the earnings go down, it affects the dividends and dwindles the company’s share value. On the other hand, dividend payouts for Grange Resources have remained cumulatively the same in the last ten years – a mighty achievement!
Not only that, but the company has been very prudent in reinvesting most of its profits back into the business itself – and if the reinvestment prove to be fruitful, they will further bolster factors for a bright future return and dividends.
Moreover, Grange Resources has always maintained a promising level of cash flow in their kitty as well. It will be promising to know that their entire payouts for last year added only up to just 14% of its free cash flow! Cash flows are more significant in assessing a dividend than profits, showing if the company can generate enough cash to pay off its distribution.
Thus, the company is positively stable overall, supported by its cash flow, reinvestment strategies, and profits.
The company’s upcoming dividend payment will be AU$ 0.02 per share. Based on last year’s payments, this shows a trailing yield of 4.4% on the current share price of AU$0.455.
Considering the remaining four days to make last-minute investments, the company is in a somewhat stable position to be worthy of consideration by investors, even though risks can always spring up around the corner.
