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 Townsquare Media, Inc. (NYSE:TSQ) is about to go ex-dividend in just 4 days. This means that investors who purchase shares on or after the 26th of December will not receive the dividend, which will be paid on the 14th of February.
Townsquare Media's next dividend payment will be US$0.075 per share. Last year, in total, the company distributed US$0.30 to shareholders. Based on the last year's worth of payments, Townsquare Media stock has a trailing yield of around 3.1% on the current share price of $9.64. If you buy this business for its dividend, you should have an idea of whether Townsquare Media's dividend is reliable and sustainable. As a result, readers should always check whether Townsquare Media has been able to grow its dividends, or if the dividend might be cut.
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. Townsquare Media 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. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 27% of its free cash flow as dividends, a comfortable payout level for most companies.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Townsquare Media was unprofitable last year, but at least the general trend suggests its earnings have 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.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Townsquare Media's dividend payments are effectively flat on where they were two years ago.
From a dividend perspective, should investors buy or avoid Townsquare Media? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." In summary, it's hard to get excited about Townsquare Media from a dividend perspective.
Wondering what the future holds for Townsquare Media? See what the three analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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