Wayside Technology Group, Inc. (NASDAQ:WSTG) stock is about to trade ex-dividend in 4 days time. Investors can purchase shares before the 16th of August in order to be eligible for this dividend, which will be paid on the 23rd of August.
Wayside Technology Group's next dividend payment will be US$0.17 per share, and in the last 12 months, the company paid a total of US$0.68 per share. Last year's total dividend payments show that Wayside Technology Group has a trailing yield of 5.4% on the current share price of $12.5. If you buy this business for its dividend, you should have an idea of whether Wayside Technology Group's dividend is reliable and sustainable. So we need to investigate whether Wayside Technology Group can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Wayside Technology Group paying out a modest 48% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 27% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Wayside Technology Group's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Wayside Technology Group has lifted its dividend by approximately 1.3% a year on average.
The Bottom Line
Is Wayside Technology Group worth buying for its dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. All things considered, we are not particularly enthused about Wayside Technology Group from a dividend perspective.
Want to learn more about Wayside Technology Group's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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