Should You Buy Patrick Industries, Inc. (NASDAQ:PATK) For Its Upcoming Dividend?
It looks like Patrick Industries, Inc. (NASDAQ:PATK) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Patrick Industries' shares before the 28th of May to receive the dividend, which will be paid on the 14th of June.
The company's next dividend payment will be US$0.28 per share, on the back of last year when the company paid a total of US$1.12 to shareholders. Last year's total dividend payments show that Patrick Industries has a trailing yield of 1.3% on the current share price of $87.59. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Patrick Industries can afford its dividend, and if the dividend could grow.
View our latest analysis for Patrick Industries
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Patrick Industries paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 15% of its free cash flow last 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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Patrick Industries's earnings have been skyrocketing, up 24% per annum for the past five years. Patrick Industries looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Given that Patrick Industries has only been paying a dividend for a year, there's not much of a past history to draw insight from.
To Sum It Up
Is Patrick Industries an attractive dividend stock, or better left on the shelf? Patrick Industries 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. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Patrick Industries has 3 warning signs we think you should be aware of.
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.
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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