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EnPro Industries, Inc. (NYSE:NPO) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 1st of December to receive the dividend, which will be paid on the 16th of December.
EnPro Industries's next dividend payment will be US$0.26 per share, on the back of last year when the company paid a total of US$1.04 to shareholders. Based on the last year's worth of payments, EnPro Industries has a trailing yield of 1.4% on the current stock price of $72.72. If you buy this business for its dividend, you should have an idea of whether EnPro Industries's dividend is reliable and sustainable. So we need to investigate whether EnPro Industries can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. EnPro Industries paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If EnPro Industries 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. Fortunately, it paid out only 26% of its free cash flow in the past year.
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. EnPro Industries reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last six years, EnPro Industries has lifted its dividend by approximately 4.5% a year on average.
We update our analysis on EnPro Industries every 24 hours, so you can always get the latest insights on its financial health, here.
To Sum It Up
Is EnPro Industries an attractive dividend stock, or better left on the shelf? It's hard to get used to EnPro Industries paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
With that being said, if dividends aren't your biggest concern with EnPro Industries, you should know about the other risks facing this business. In terms of investment risks, we've identified 1 warning sign with EnPro Industries and understanding them should be part of your investment process.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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