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 IDEX Corporation (NYSE:IEX) is about to go ex-dividend in just 3 days. Investors can purchase shares before the 14th of January in order to be eligible for this dividend, which will be paid on the 30th of January.
IDEX's upcoming dividend is US$0.50 a share, following on from the last 12 months, when the company distributed a total of US$2.00 per share to shareholders. Calculating the last year's worth of payments shows that IDEX has a trailing yield of 1.2% on the current share price of $173.89. If you buy this business for its dividend, you should have an idea of whether IDEX's dividend is reliable and sustainable. As a result, readers should always check whether IDEX has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. IDEX paid out a comfortable 34% of its profit last year. A useful secondary check can be to evaluate whether IDEX generated enough free cash flow to afford its dividend. It distributed 30% of its free cash flow as dividends, a comfortable payout level 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.
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. For this reason, we're glad to see IDEX's earnings per share have risen 13% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past ten years, IDEX has increased its dividend at approximately 15% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Should investors buy IDEX for the upcoming dividend? IDEX has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about IDEX, and we would prioritise taking a closer look at it.
Wondering what the future holds for IDEX? See what the 13 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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