Ashland Inc. (NYSE:ASH) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Ashland investors that purchase the stock on or after the 30th of May will not receive the dividend, which will be paid on the 15th of June.

The company's next dividend payment will be US$0.415 per share, and in the last 12 months, the company paid a total of US$1.62 per share. Based on the last year's worth of payments, Ashland stock has a trailing yield of around 3.4% on the current share price of US$49.30. If you buy this business for its dividend, you should have an idea of whether Ashland's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Ashland's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Ashland didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Over the last year, it paid out dividends equivalent to 233% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Ashland intends to continue funding this dividend, or if it could be forced to cut the payment.

See our latest analysis for Ashland

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.NYSE:ASH Historic Dividend May 25th 2025

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Ashland was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

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Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ashland has delivered an average of 2.0% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Ashland is keeping back more of its profits to grow the business.

Get our latest analysis on Ashland's balance sheet health here.

To Sum It Up

Is Ashland worth buying for its dividend? It's hard to get used to Ashland paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Ashland. For example - Ashland has 1 warning sign we think you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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