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Is It Smart To Buy Willis Towers Watson Public Limited Company (NASDAQ:WLTW) Before It Goes Ex-Dividend?

Simply Wall St

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 Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 27th of September will not receive this dividend, which will be paid on the 15th of October.

Willis Towers Watson's next dividend payment will be US$0.7 per share. Last year, in total, the company distributed US$2.6 to shareholders. Based on the last year's worth of payments, Willis Towers Watson has a trailing yield of 1.3% on the current stock price of $196.37. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Willis Towers Watson can afford its dividend, and if the dividend could grow.

View our latest analysis for Willis Towers Watson

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 Willis Towers Watson's payout ratio is modest, at just 39% of profit.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

NasdaqGS:WLTW Historical Dividend Yield, September 22nd 2019

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. With that in mind, we're encouraged by the steady growth at Willis Towers Watson, with earnings per share up 3.3% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Willis Towers Watson has seen its dividend decline 0.6% per annum on average over the past ten years, which is not great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid Willis Towers Watson? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Willis Towers Watson ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

Curious what other investors think of Willis Towers Watson? See what analysts 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.

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.

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. Thank you for reading.