Analog Devices, Inc. (NASDAQ:ADI) Stock Goes Ex-Dividend In Just Four Days
Analog Devices, Inc. (NASDAQ:ADI) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Analog Devices' shares before the 4th of March in order to receive the dividend, which the company will pay on the 15th of March.
The company's next dividend payment will be US$0.92 per share, on the back of last year when the company paid a total of US$3.68 to shareholders. Based on the last year's worth of payments, Analog Devices stock has a trailing yield of around 1.9% on the current share price of US$189.07. If you buy this business for its dividend, you should have an idea of whether Analog Devices's dividend is reliable and sustainable. So we need to investigate whether Analog Devices can afford its dividend, and if the dividend could grow.
View our latest analysis for Analog Devices
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. Analog Devices is paying out an acceptable 62% of its profit, a common payout level among most companies. 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. It paid out more than half (53%) of its free cash flow in the past year, which is within an average range for most companies.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Analog Devices earnings per share are up 7.0% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Analog Devices has delivered an average of 10% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Should investors buy Analog Devices for the upcoming dividend? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. In summary, it's hard to get excited about Analog Devices from a dividend perspective.
Ever wonder what the future holds for Analog Devices? See what the 27 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
