Sirius XM Holdings Inc. (NASDAQ:SIRI) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
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 Sirius XM Holdings Inc. (NASDAQ:SIRI) 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. Thus, you can purchase Sirius XM Holdings' shares before the 8th of February in order to receive the dividend, which the company will pay on the 24th of February.
The company's next dividend payment will be US$0.024 per share, on the back of last year when the company paid a total of US$0.097 to shareholders. Calculating the last year's worth of payments shows that Sirius XM Holdings has a trailing yield of 1.8% on the current share price of $5.3. 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! So we need to investigate whether Sirius XM Holdings can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Sirius XM Holdings
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Sirius XM Holdings's payout ratio is modest, at just 30% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 23% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Sirius XM Holdings's earnings per share have risen 15% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sirius XM Holdings has delivered 16% dividend growth per year on average over the past six years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Should investors buy Sirius XM Holdings for the upcoming dividend? We love that Sirius XM Holdings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about Sirius XM Holdings, and we would prioritise taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 4 warning signs for Sirius XM Holdings (2 are significant!) that deserve your attention before investing in the 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.
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