Finning International Inc. (TSE:FTT) Stock Goes Ex-Dividend In Just Two Days
Readers hoping to buy Finning International Inc. (TSE:FTT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Finning International's shares before the 23rd of August in order to receive the dividend, which the company will pay on the 7th of September.
The company's next dividend payment will be CA$0.25 per share, and in the last 12 months, the company paid a total of CA$1.00 per share. Calculating the last year's worth of payments shows that Finning International has a trailing yield of 2.4% on the current share price of CA$41.11. If you buy this business for its dividend, you should have an idea of whether Finning International's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Finning International
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Finning International's payout ratio is modest, at just 26% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 259% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.
Finning International paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Finning International's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 Finning International's earnings have been skyrocketing, up 25% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Finning International has lifted its dividend by approximately 6.0% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Finning International is keeping back more of its profits to grow the business.
To Sum It Up
From a dividend perspective, should investors buy or avoid Finning International? We like that Finning International has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. In summary, while it has some positive characteristics, we're not inclined to race out and buy Finning International today.
On that note, you'll want to research what risks Finning International is facing. For example, we've found 2 warning signs for Finning International (1 is concerning!) that deserve your attention before investing in 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.
