Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Broadridge Financial Solutions, Inc. (NYSE:BR) is about to go ex-dividend in just four days. You can purchase shares before the 14th of December in order to receive the dividend, which the company will pay on the 5th of January.
Broadridge Financial Solutions's next dividend payment will be US$0.57 per share. Last year, in total, the company distributed US$2.30 to shareholders. Looking at the last 12 months of distributions, Broadridge Financial Solutions has a trailing yield of approximately 1.6% on its current stock price of $147.23. If you buy this business for its dividend, you should have an idea of whether Broadridge Financial Solutions'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.
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. Broadridge Financial Solutions paid out more than half (53%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Broadridge Financial Solutions generated enough free cash flow to afford its dividend. It distributed 46% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Broadridge Financial Solutions's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Broadridge Financial Solutions's earnings per share have been growing at 11% a year for the past five years. Broadridge Financial Solutions has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Broadridge Financial Solutions has lifted its dividend by approximately 15% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Should investors buy Broadridge Financial Solutions for the upcoming dividend? Broadridge Financial Solutions's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Broadridge Financial Solutions for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Broadridge Financial Solutions you should know about.
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.
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. 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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