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Is It Smart To Buy Twin River Worldwide Holdings, Inc. (NYSE:TRWH) Before It Goes Ex-Dividend?

Simply Wall St

Twin River Worldwide Holdings, Inc. (NYSE:TRWH) stock is about to trade ex-dividend in 3 days time. You will need to purchase shares before the 5th of March to receive the dividend, which will be paid on the 20th of March.

Twin River Worldwide Holdings's upcoming dividend is US$0.10 a share, following on from the last 12 months, when the company distributed a total of US$0.40 per share to shareholders. Based on the last year's worth of payments, Twin River Worldwide Holdings stock has a trailing yield of around 1.5% on the current share price of $26. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Twin River Worldwide Holdings has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Twin River Worldwide Holdings

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. Twin River Worldwide Holdings paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 8.0% of its 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.

NYSE:TRWH Historical Dividend Yield, March 1st 2020

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Twin River Worldwide Holdings earnings per share are up 7.9% per annum over the last three years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

Unfortunately Twin River Worldwide Holdings has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Is Twin River Worldwide Holdings worth buying for its dividend? Earnings per share growth has been growing somewhat, and Twin River Worldwide Holdings is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Twin River Worldwide Holdings is halfway there. There's a lot to like about Twin River Worldwide Holdings, and we would prioritise taking a closer look at it.

Curious what other investors think of Twin River Worldwide Holdings? See what analysts 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.