Interested In Enpro's (NYSE:NPO) Upcoming US$0.30 Dividend? You Have Two Days Left
It looks like Enpro Inc. (NYSE:NPO) is about to go ex-dividend in the next 2 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. 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. This means that investors who purchase Enpro's shares on or after the 5th of March will not receive the dividend, which will be paid on the 20th of March.
The company's next dividend payment will be US$0.30 per share, on the back of last year when the company paid a total of US$1.20 to shareholders. Based on the last year's worth of payments, Enpro stock has a trailing yield of around 0.8% on the current share price of US$155.52. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Enpro
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Enpro paid out a disturbingly high 224% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business. A useful secondary check can be to evaluate whether Enpro generated enough free cash flow to afford its dividend. It paid out 14% of its free cash flow as dividends last year, which is conservatively low.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Enpro fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. That's why it's comforting to see Enpro's earnings have been skyrocketing, up 22% per annum for the past five years.
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, nine years ago, Enpro has lifted its dividend by approximately 4.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Enpro is keeping back more of its profits to grow the business.
Final Takeaway
Should investors buy Enpro for the upcoming dividend? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Enpro is paying out so much of its profit. Overall, it's hard to get excited about Enpro from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Enpro and you should be aware of them before buying any shares.
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.
