TEGNA Inc. (NYSE:TGNA) stock is about to trade ex-dividend in 4 days time. If you purchase the stock on or after the 5th of September, you won't be eligible to receive this dividend, when it is paid on the 1st of October.
TEGNA's next dividend payment will be US$0.07 per share, and in the last 12 months, the company paid a total of US$0.28 per share. Last year's total dividend payments show that TEGNA has a trailing yield of 2.0% on the current share price of $14.31. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether TEGNA has been able to grow its dividends, or if the dividend might be cut.
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. TEGNA has a low and conservative payout ratio of just 15% of its income after tax. A useful secondary check can be to evaluate whether TEGNA generated enough free cash flow to afford its dividend. It paid out 15% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that TEGNA'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. That's why it's comforting to see TEGNA's earnings have been skyrocketing, up 60% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, TEGNA looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. TEGNA has seen its dividend decline 16% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
From a dividend perspective, should investors buy or avoid TEGNA? TEGNA has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past ten years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about TEGNA, and we would prioritise taking a closer look at it.
Curious what other investors think of TEGNA? See what analysts 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.