Should You Buy WisdomTree, Inc. (NYSE:WT) For Its Upcoming Dividend?
WisdomTree, Inc. (NYSE:WT) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Accordingly, WisdomTree investors that purchase the stock on or after the 13th of February will not receive the dividend, which will be paid on the 28th of February.
The company's upcoming dividend is US$0.03 a share, following on from the last 12 months, when the company distributed a total of US$0.12 per share to shareholders. Based on the last year's worth of payments, WisdomTree stock has a trailing yield of around 1.7% on the current share price of US$6.89. 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 WisdomTree has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for WisdomTree
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. WisdomTree has a low and conservative payout ratio of just 17% of its income after tax.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see WisdomTree has grown its earnings rapidly, up 25% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. WisdomTree's dividend payments per share have declined at 10% per year on average over the past nine years, which is uninspiring. WisdomTree is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
To Sum It Up
Is WisdomTree an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating WisdomTree more closely.
While it's tempting to invest in WisdomTree for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for WisdomTree (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
