Dividend Investors: Don't Be Too Quick To Buy TI Fluid Systems plc (LON:TIFS) For Its Upcoming Dividend
TI Fluid Systems plc (LON:TIFS) is about to trade ex-dividend in the next 3 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. Thus, you can purchase TI Fluid Systems' shares before the 17th of August in order to receive the dividend, which the company will pay on the 15th of September.
The company's next dividend payment will be €0.023 per share, and in the last 12 months, the company paid a total of €0.025 per share. Based on the last year's worth of payments, TI Fluid Systems stock has a trailing yield of around 1.5% on the current share price of £1.424. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether TI Fluid Systems can afford its dividend, and if the dividend could grow.
See our latest analysis for TI Fluid Systems
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. TI Fluid Systems reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If TI Fluid Systems didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Luckily it paid out just 25% of its free cash flow last year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. TI Fluid Systems reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, five years ago, TI Fluid Systems has lifted its dividend by approximately 14% a year on average.
Get our latest analysis on TI Fluid Systems's balance sheet health here.
Final Takeaway
From a dividend perspective, should investors buy or avoid TI Fluid Systems? It's hard to get used to TI Fluid Systems paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
Ever wonder what the future holds for TI Fluid Systems? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.
