U.S. Markets open in 7 hrs 48 mins
  • S&P Futures

    4,165.00
    +9.50 (+0.23%)
     
  • Dow Futures

    34,045.00
    +87.00 (+0.26%)
     
  • Nasdaq Futures

    13,918.25
    +21.00 (+0.15%)
     
  • Russell 2000 Futures

    2,234.10
    +4.80 (+0.22%)
     
  • Crude Oil

    64.00
    +0.62 (+0.98%)
     
  • Gold

    1,769.30
    -1.30 (-0.07%)
     
  • Silver

    25.93
    +0.10 (+0.38%)
     
  • EUR/USD

    1.2063
    +0.0022 (+0.1809%)
     
  • 10-Yr Bond

    1.6010
    0.0000 (0.00%)
     
  • Vix

    17.29
    +1.04 (+6.40%)
     
  • GBP/USD

    1.3995
    +0.0011 (+0.0770%)
     
  • USD/JPY

    108.2180
    +0.0680 (+0.0629%)
     
  • BTC-USD

    54,863.34
    -2,027.29 (-3.56%)
     
  • CMC Crypto 200

    1,236.47
    -62.48 (-4.81%)
     
  • FTSE 100

    7,000.08
    -19.45 (-0.28%)
     
  • Nikkei 225

    29,068.81
    -616.56 (-2.08%)
     

Do These 3 Checks Before Buying EnPro Industries, Inc. (NYSE:NPO) For Its Upcoming Dividend

  • Oops!
    Something went wrong.
    Please try again later.
Simply Wall St
·4 min read
  • Oops!
    Something went wrong.
    Please try again later.

EnPro Industries, Inc. (NYSE:NPO) stock is about to trade ex-dividend in 4 days time. You will need to purchase shares before the 3rd of March to receive the dividend, which will be paid on the 18th of March.

EnPro Industries's upcoming dividend is US$0.26 a share, following on from the last 12 months, when the company distributed a total of US$1.04 per share to shareholders. Based on the last year's worth of payments, EnPro Industries has a trailing yield of 1.8% on the current stock price of $56.7. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for EnPro Industries

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. An unusually high payout ratio of 265% of its profit suggests something is happening other than the usual distribution of profits to shareholders. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 11% of its free cash flow in the last year.

It's good to see that while EnPro Industries's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NYSE:NPO Historical Dividend Yield, February 27th 2020
NYSE:NPO Historical Dividend Yield, February 27th 2020

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. EnPro Industries's earnings per share have fallen at approximately 17% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last five years, EnPro Industries has lifted its dividend by approximately 5.4% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. EnPro Industries is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

The Bottom Line

Has EnPro Industries got what it takes to maintain its dividend payments? It's never great to see earnings per share declining, especially when a company is paying out 265% of its profit as dividends, which we feel is uncomfortably high. Yet cashflow was much stronger, which makes us wonder if there are some large timing issues in EnPro Industries's cash flows, or perhaps the company has written down some assets aggressively, reducing its income. Bottom line: EnPro Industries has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

Wondering what the future holds for EnPro Industries? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.