Be Sure To Check Out Broadridge Financial Solutions, Inc. (NYSE:BR) Before It Goes Ex-Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Broadridge Financial Solutions, Inc. (NYSE:BR) is about to trade ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Broadridge Financial Solutions' shares on or after the 14th of March, you won't be eligible to receive the dividend, when it is paid on the 5th of April.
The company's next dividend payment will be US$0.80 per share. Last year, in total, the company distributed US$3.20 to shareholders. Last year's total dividend payments show that Broadridge Financial Solutions has a trailing yield of 1.6% on the current share price of US$203.55. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Broadridge Financial Solutions can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Broadridge Financial Solutions
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Broadridge Financial Solutions paid out 53% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Broadridge Financial Solutions generated enough free cash flow to afford its dividend. Fortunately, it paid out only 37% of its free cash flow in the past year.
It's positive to see that Broadridge Financial Solutions's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. This is why it's a relief to see Broadridge Financial Solutions earnings per share are up 9.6% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Broadridge Financial Solutions has increased its dividend at approximately 16% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Has Broadridge Financial Solutions got what it takes to maintain its dividend payments? Earnings per share growth has been modest and Broadridge Financial Solutions paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. To summarise, Broadridge Financial Solutions looks okay on this analysis, although it doesn't appear a stand-out opportunity.
On that note, you'll want to research what risks Broadridge Financial Solutions is facing. Every company has risks, and we've spotted 1 warning sign for Broadridge Financial Solutions you should know about.
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.
