D.R. Horton, Inc. (NYSE:DHI) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 3rd of December in order to receive the dividend, which the company will pay on the 14th of December.
D.R. Horton's next dividend payment will be US$0.20 per share. Last year, in total, the company distributed US$0.80 to shareholders. Calculating the last year's worth of payments shows that D.R. Horton has a trailing yield of 1.1% on the current share price of $76.16. If you buy this business for its dividend, you should have an idea of whether D.R. Horton's dividend is reliable and sustainable. So we need to investigate whether D.R. Horton can afford its dividend, and if the dividend could grow.
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. D.R. Horton has a low and conservative payout ratio of just 11% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 23% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that D.R. Horton'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. It's encouraging to see D.R. Horton has grown its earnings rapidly, up 26% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, D.R. Horton looks like a promising growth company.
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, D.R. Horton has lifted its dividend by approximately 18% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Is D.R. Horton an attractive dividend stock, or better left on the shelf? D.R. Horton 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 D.R. Horton, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks D.R. Horton is facing. In terms of investment risks, we've identified 1 warning sign with D.R. Horton and understanding them should be part of your investment process.
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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