Should Income Investors Look At Twin Disc, Incorporated (NASDAQ:TWIN) Before Its Ex-Dividend?
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Twin Disc, Incorporated (NASDAQ:TWIN) is about to go ex-dividend in just four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase Twin Disc's shares on or after the 16th of November, you won't be eligible to receive the dividend, when it is paid on the 1st of December.
The company's upcoming dividend is US$0.04 a share, following on from the last 12 months, when the company distributed a total of US$0.16 per share to shareholders. Calculating the last year's worth of payments shows that Twin Disc has a trailing yield of 1.2% on the current share price of $13.85. 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 Twin Disc can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Twin Disc
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. Twin Disc paid out just 5.1% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Click here to see how much of its profit Twin Disc paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Twin Disc's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Twin Disc has seen its dividend decline 7.8% per annum on average over the past 10 years, which is not great to see.
To Sum It Up
Has Twin Disc got what it takes to maintain its dividend payments? Twin Disc's earnings per share are basically flat over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. Twin Disc ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Want to learn more about Twin Disc? Here's a visualisation of its historical rate of revenue and earnings growth.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
