Interested In Vector Group's (NYSE:VGR) Upcoming US$0.20 Dividend? You Have Three Days Left
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Vector Group Ltd. (NYSE:VGR) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Vector Group's shares on or after the 30th of November will not receive the dividend, which will be paid on the 15th of December.
The company's upcoming dividend is US$0.20 a share, following on from the last 12 months, when the company distributed a total of US$0.80 per share to shareholders. Based on the last year's worth of payments, Vector Group has a trailing yield of 7.3% on the current stock price of $10.97. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Vector Group has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Vector Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Vector Group paid out 73% of its earnings to investors last year, a normal payout level for most businesses. 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 more than half (69%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Vector Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Vector Group paid out over the last 12 months.
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. Fortunately for readers, Vector Group's earnings per share have been growing at 15% a year for the past five years. Vector Group is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Vector Group has seen its dividend decline 3.5% per annum on average over the past 10 years, which is not great to see. Vector Group is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
To Sum It Up
Is Vector Group worth buying for its dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Vector Group is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, while it has some positive characteristics, we're not inclined to race out and buy Vector Group today.
In light of that, while Vector Group has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 3 warning signs for Vector Group (2 shouldn't be ignored) you should be aware of.
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.
