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Is It Smart To Buy Patrick Industries, Inc. (NASDAQ:PATK) Before It Goes Ex-Dividend?

Simply Wall St

Patrick Industries, Inc. (NASDAQ:PATK) is about to trade ex-dividend in the next 2 days. Ex-dividend means that investors that purchase the stock on or after the 13th of December will not receive this dividend, which will be paid on the 30th of December.

Patrick Industries's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Looking at the last 12 months of distributions, Patrick Industries has a trailing yield of approximately 1.9% on its current stock price of $51.84. If you buy this business for its dividend, you should have an idea of whether Patrick Industries's dividend is reliable and sustainable. So we need to investigate whether Patrick Industries can afford its dividend, and if the dividend could grow.

View our latest analysis for Patrick Industries

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

NasdaqGS:PATK Historical Dividend Yield, December 10th 2019

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Patrick Industries has grown its earnings rapidly, up 33% a year for the past five years. Patrick Industries is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

This is Patrick Industries's first year of paying a dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

To Sum It Up

Is Patrick Industries an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating Patrick Industries more closely.

Ever wonder what the future holds for Patrick Industries? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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 editorial-team@simplywallst.com. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.